Forget about the Reserve Bank cutting interest rates by Christmas – and you can probably douse your hopes for a pre-Easter reduction too.
Reserve Bank governor Michele Bullock made it clear after her board ended its two-day gathering on Tuesday by leaving the cash rate where it’s sat for the past year that she’s in no hurry to bring relief to borrowers.
“We believe that settings are restrictive and we need to keep rates restrictive for the time being,” she told reporters.
Nobody except the wildest optimists expected the RBA would lower interest rates this month (even if some might argue they should). The fact that the board didn’t even bother to consider a rate cut will disappoint.
“The conversation was more around, ‘what would you need to see for us to change direction?’” Bullock said. As per its September meeting, the only option on the table was leaving rates unchanged.
For sure, the board admits the global outlook is “high uncertain”, as anyone with an eye on the US elections can attest. But shy of some political maelstrom erupting there or elsewhere between now and 9-10 December, the RBA’s final board meeting of 2024 will be a formality of extending the rate pause another month.
The RBA board – unless there’s an emergency – won’t reconvene until 17-18 February. By then, we’ll have year-end data on indicators such as inflation (due out 29 January).
The bank’s been happy its recent forecasts have been generally accurate. Its updated predictions – contained in its statement on monetary policy – have underlying inflation only slowing from 3.5% in the September quarter to 3.4% by the end of 2024.
That trajectory is hardly the angle of decline to give Bullock & Co confidence inflation is on track to be “sustainably” within its 2%-3% target range.
It’s plausible the board will wait until the March quarter inflation numbers drop (30 April) before a rate cut is a live option. Then we’re looking at the 19-20 May RBA meeting – quite possibly on the other side of a federal election.
