Reserve Bank keeps rates steady at 4.35% at August meeting

The official cash rate has been left on hold at 4.35% following the Reserve Bank Board's August monetary policy meeting. 

The decision means that interest rates are likely to stay at their current 12-year high for at least another seven weeks until the Board next meets.

Leading up to today's meeting, economists had generally expected a sixth consecutive hold from the RBA Board following last week's quarterly inflation data which came in largely in line with expectations.

In fact, 32 of the 33 economists surveyed by Reuters in the build up to today's meeting had anticipated another hold from the central bank.

In its post meeting statement, the Board maintained that Australia is still not out of the woods when it comes to its inflation challenges though. 

"Inflation in underlying terms remains too high, and the latest projections show that it will be some time yet before inflation is sustainably in the target range.

"Data have reinforced the need to remain vigilant to upside risks to inflation and the Board is not ruling anything in or out. Policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range."

Rate cuts 'likely' if inflation maintains course  

Last week the Bank of England became the latest central bank to begin reducing rates, and there's plenty of speculation that the Federal Reserve in the United States could follow soon.

So as other central banks begin to lower rates, many Australians - especially those with mortgage debt - may be wondering when the RBA will start doing the same.

That, of course, is the million-dollar question. In its most recent statement on monetary policy released last month, the Reserve Bank noted that its expectations were for inflation to reach the 2-3% target band in the second half of 2025.

That doesn't necessarily mean that interest rates will remain the same for the next year though.

Luci Ellis, economic spokesperson at Westpac and former Reserve Bank assistant governor, wrote in an analysis published at the beginning of the week that given the time it takes for rate changes to flow through, the RBA may choose to act before the target is reached. 

"Monetary policy operates with a lag, so rate cuts need to start ahead of inflation reaching target. If the Board waits too long, it will risk undershooting the target for no benefit. 

"So rate cuts are likely in the near future, provided inflation continues to traverse the trajectory that the RBA Board is seeking to achieve."

Will interest rates go down in 2024? 

So how close could an interest rate cut be? Currently, Westpac is pencilling in the Reserve Bank's November monetary policy meeting for an initial cut.

That prediction is shared by the Commonwealth Bank, while fellow major banks ANZ (February 2025) and NAB (by June 2025) are anticipating a slightly longer timeframe. 

Elsewhere, a survey undertaken by Finder in the lead up to today's meeting found that one in four economists and experts (26%) are expecting to see the cash rate reduced before the end of the year, while nearly half (48%) think that the central bank will cut before the end of February.

What nobody seems to be expecting at the moment is any shift in rates when the Reserve Bank Board meets again on September 23 and 24. 

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