New look, same outcome: RBA holds cash rate at 4.35%


The Reserve Bank may have started its new era of two-day meetings and greater transparency, but the interest rate outcome following its February Board meeting was the same as it was when it last met in December: no change.

The decision means that the cash rate will remain at a 12-year high of 4.35% until at least March 19 when the Reserve Bank Board hands down its next verdict.

"The board expects that it will be some time yet before inflation is sustainably in the target range," said a statement from the RBA.

rba holds rates at february 2024 meeting

"The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks, and a further increase in interest rates cannot be ruled out."

Leading up to today's rate announcement the consensus was that rates would almost certainly be held steady, so the central bank's decision comes as little surprise. In fact, all 27 experts polled by comparison website Finder predicted that the cash rate would remain at 4.35%.

This conviction was largely based on last week's Consumer Price Index (CPI) figures which came in slightly lower than expected.

Inflation eased to an annual rate of 4.1%, according to the Australian Bureau of Statistics, which is the lowest it's been since the December quarter of 2021.

When will interest rates start to fall?

Late last year there was still speculation that - depending on the December quarter inflation figures - the RBA could be forced to lift rates once more. That, of course, didn't happen.

So are the rates hikes finally behind us?

In its post-meeting statement the Reserve Bank Board itself remained cautious about the direction of any future rate movements, but some of Australia's largest banks are more bullish about the prospect of rate cuts on the horizon.

Writing after the release of last week's CPI results, Westpac's chief economist Luci Ellis noted that the bank was anticipating the Reserve Bank to begin a cutting cycle in the second half of this year.

"We expect that over coming months, further declines in inflation and soft outcomes in the real economy will give the Board enough confidence that inflation will return to target on the desired timetable.

"They will therefore have scope to reduce some of the current restrictiveness of policy. We continue to expect the first rate cut no earlier than September."

Once the central bank does begin reducing rates, Westpac expects it to continue cutting at a rate of 25bps each quarter before bottoming out at 3.10% in the third quarter of 2025.

The Commonwealth Bank, meanwhile, is penciling in September as the likely month for the RBA to begin lowering rates. Overall it is predicting 75bp worth of cuts in the latter part 2024 and a further 75bp in the first half of 2025 which would take the cash rate to 2.85%.

Lenders begin re-pricing loans

Whenever the day of any future rate cut comes, it will certainly be welcomed by anyone with a mortgage.

Since April 2022, homeowners paying an average interest rate on the average $624,000 loan have seen their repayments shoot up by $1400 a month, or $16,788 each year, according to Finder.

Encouragingly though, Finder's head of consumer research, Graham Cooke, says that some lenders are already beginning to shift their rates lower.

"We're now starting to see a few banks ease rates on some of their fixed rate home loans in anticipation of rate cuts to come - the attitude has certainly shifted.

"If your rate doesn't start with a '5', it may be time to consider your refinancing options."

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Tom Watson is a senior journalist at Money magazine, and one of the hosts of the Friends With Money podcast. He's previously worked as a journalist covering everything from property and consumer banking to financial technology. Tom has a Bachelor of Communication (Journalism) from the University of Technology, Sydney.