RBA interest rates December: Bank pauses interest rates at 4.35% in final meeting of the year

The RBA has made its final decision for the year, delivering a surprise move after last month’s rise which saw homeowners across the country lumped with mortgage pain.

Australian homeowners have been dealt some welcome relief right before Christmas with the Reserve Bank (RBA) sparing them from more mortgage pain.

On Tuesday afternoon, Australia’s central bank chose to pause interest rates at the final meeting of 2023 amid signs of inflation slowing down.

It follows last month’s decision, which saw the RBA increase the cash rate to 4.35 per cent in a shock to Australian households — the first rise in four months.

The next RBA board meeting isn’t until February, which means mortgagees have some breathing room.

The cash rate remains at 4.35 per cent.

That’s still a far cry from the historic low of 0.1 per cent Australians enjoyed during the Covid-19 pandemic.

In the following two years, the rate has skyrocketed by 425 basis points.

The rate is now at its highest level since 2011.

RBA governor, Michele Bullock, said she and the board had come to the decision because “inflation is continuing to moderate”.

RBA governor Michele Bullock is on the board deciding the fate of Aussie homeowners. Picture: Aaron Francis / The Australian

Ms Bullock acknowledged that inflation and the cost of living crisis was “weighing on people’s real incomes” but warned that the RBA would do “what is necessary” to bring down inflation to its two to three per cent target.

She went on to say in her statement that all measures of inflation showed that what they are doing “remain(s) consistent with the inflation target”.

Australians are feeling the pinch after two years of interest rate increases.

Those with a $600,000 mortgage are forking out roughly $1,349 more a month than they were before the RBA started lifting the cash rate in May last year, according to comparison website Finder.

Last month, news.com.au reported new research from Digital Financial Analytics had found that more than two million Australian households are spending more than they make each month.

A recent Canstar survey found that as many as 35 per cent of households have already accessed money from their redraw or offset account to cover expenses amid the cost of living crisis.

MyState Bank released research last month that found more than two in five (43 per cent) mortgage holders have looked for a better home loan deal in the past six months.

Auction clearance rates are slowing down in a sign of interest rate hikes taking effect. Picture: NCA Newswire / Gaye Gerard

One economist is warning Aussies to brace for another rate rise at the next RBA meeting, in February next year.

AMP’s deputy chief economist Diana Mousina predicts the RBA will start cutting interest rates from mid next year. She has also forewarned that a February rate rise is likely.

“Our base case is for the cash rate to remain unchanged at 4.35% until the start of rate cuts from mid-2024, but recognise the high risk (~45% chance) of another 0.25% rate hike which could come at the February Board meeting,” she wrote.

Meanwhile, a Reuters poll has forecast that the rate won’t be slashed until the last quarter of 2024.

New consumer price index (CPI) figures found that inflation is well below its peak compared to a year ago.

The inflation rate is sitting at 4.9 per cent, below what most economists were expecting.

In December last year, the inflation rate peaked at 8.4 per cent, and has been brought down since then with multiple back-to-back hikes.