RBA leaves rates on hold for third consecutive meeting

The Reserve Bank of Australia has left interest rates on hold for a third consecutive meeting, but when it comes to the outlook, it’s “not ruling anything in or out”.

Interest rates are to stay the same with no relief on the horizon for struggling mortgage holders, the Reserve Bank of Australia (RBA) has announced for a third consecutive time.

The rate has been held at 4.35 per cent since November 2023 with many homeowners desperate for a drop, but the RBA’s governor Michele Bullock admitted they were “not ruling anything in or out”.

Financial markets are continuing to anticipate the first interest rate cut will come from the RBA in September, but the RBA has refused to say if interest rates could rise again.

The prospect of another interest rate rise looms as the inflation rate, which currents sits at 4.1 per cent, remains well above the RBA’s target range of two to three per cent.

Announcing the decision to keep interest rates on hold RBA governor Ms Bullock warned Australians that “while there are encouraging signs that inflation is moderating, the economic outlook remains uncertain”.

The RBA maintains its laser-like focus on inflation, as the board said “returning inflation to target within a reasonable timeframe” remains its “highest priority”.

“While recent data indicate that inflation is easing, it remains high,” the RBA said, announcing today’s decision.

“The Board expects that it will be some time yet before inflation is sustainably in the target range.”

The last consumer price index data, for the three months to December 2023, showed inflation had fallen by 0.6 per cent since the end of September.

The next set of inflation data, for the first three months of 2024, will be released in April, ahead of the RBA’s next board meeting on May 7.

ANZ Bank CEO Shayne Elliott believes inflation continues to pose a problem in the Australian economy. Picture: Dan Peled / NCA NewsWire

Shayne Elliott, the CEO of ANZ Bank, is among those who believe inflation continues to pose a problem in the Australian economy.

“I think the next move is a cut, but you can’t rule out a surprise here,” he told Bloomberg TV yesterday.

“What we’ve learned over the last couple of years is that we should expect to be surprised every now and again,” he said.

“And inflation has been more stubborn than people thought. And so I don’t think it would take a lot for us to see a rate hike.”

Judo Bank chief economic advisor Warren Hogan also thinks that next move the RBA makes could be to increase interest rates in the middle of the year, especially if economic growth picks up.

“We’ve only had one rate hike since July 2023, and we know that we’re going to get a big boost to disposable incomes, starting on July 1 this year with the tax cuts,” Mr Hogan said.

“And, of course, what the national accounts show, along with other data, is the rest of the economy [outside the household sector] is doing fine,” he told The Australian Financial Review.

Judo Bank chief economic advisor Warren Hogan thinks that next move the RBA makes could be to increase interest rates in the middle of this year.

Mr Elliott, Mr Hogan and a handful of other economists are also of the view that the first interest rate cut may not come until 2025 due to inflation remaining stubbornly high.

Mr Elliott is in disagreement with his own bank’s economists over whether the Reserve Bank of Australia (RBA) will begin to cut interest rates this year.

“The house view at ANZ is that we’ll probably see rate cuts towards the end of the calendar year,” Mr Elliott said.

“My personal view is that is still optimistic.”

Mr Hogan was found to be the most accurate RBA cash rate economic forecaster out of 29 ranked by The Australian Financial Review in 2023.

In the past week, bond traders have also pushed back the likelihood of a cut in the cash rate from August or September this year to November instead.

In a big change for 2024, the RBA board will only meet eight times a year, or roughly once every six weeks, rather than on the first Tuesday of every month as it previously did.

Originally published as RBA leaves rates on hold for third consecutive meeting