Great news from the RBA! Despite recent whispers about a potential increase, we’re delighted to inform you percent for the fifth consecutive time that the RBA has decided to maintain the cash rate at 4.35% for June. This decision reflects their confidence in the current monetary policy to guide inflation into the target range of 2 to 3 percent, despite strong jobs and inflation data.
Economists and traders anticipated this move, predicting the bank would hold this week.
CreditorWatch’s chief economist, Anneke Thompson, expressed optimism, stating she feels it is unlikely the RBA will move the cash rate higher from here. “Rather, the likely scenario is for the RBA to maintain the pressure on prices by keeping the cash rate at 4.35 per cent in to early 2025, and only reducing it once the impact of lower migration levels begin to impact services inflation,” Thompson said.
VanEck’s head of investments & capital markets, Russel Chesler, agreed that any reduction to the cash rate is a “long way off”. “We don’t see a rate cut happening until 2025 – and possibly not until mid-year. Since the RBA last met, we haven’t seen evidence of inflation easing. In fact, there are some indicators that inflation may be re-accelerating. All eyes will be on the CPI print next week to see whether inflation has changed direction,” Chesler said.
GSFM investment strategist Stephen Miller predicted the RBA’s decision accurately and supported their cautious approach. “My best guess – and it is just a guess – is that a further hike is unlikely given the likelihood that underlying weakness in activity growth will show through in a weaker labour market and allow a more confident projection of inflation declining toward target,” Miller said.
“The most likely scenario is an extended pause in any policy rate adjustment until the RBA is convinced that its current trajectory for the return of inflation to target is secure. That argues for a policy rate cut toward the end of the year or sometime in the first half of 2025.”
Economists broadly agree that rate cuts may not happen this year, with some, like ANZ, forecasting the first cut in February 2025, while CBA still anticipates a cut in late 2024.
For mortgage holders, this means interest rates are unlikely to decrease in the near future without taking proactive measures such as refinancing or consolidating debt.
Although borrowers will be preferring a rate cut, there’s a silver lining: the upcoming stage three tax cuts in July could provide some financial relief. The government’s decision to implement these tax cuts is a bold move, aimed at offering short-term relief to consumers. Households struggling with finances can use this extra income to alleviate their burdens, while those in a stable position could consider using it to make additional mortgage payments.
While the July 2024 tax cuts might not result in a massive windfall for the average Australian, they do present an opportunity to make a positive impact on your mortgage. By consistently redirecting your tax savings towards your home loan, you can gradually reduce your loan term and lower your interest payments.
It’s important to remember that every little bit counts. Even small, consistent contributions can make a big difference over time, bringing you closer to financial freedom and a mortgage-free future.
We’re here to help with all your finance decisions, so please reply with any questions you may have about today’s announcement or your loan situation.
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