Australian borrowers could be a little at ease this Christmas holiday season as the Reserve Bank of Australia (RBA) has decided to put the official cash rate on hold for December.
The decision matched many economists’ expectations about a pause for December.
The RBA raised the cash rate in November because of the increasing risk that inflation would remain in the economy for a longer period of time than previously expected.
However, since then, the domestic economic data received by the board, although limited, has shown that inflation is evolving in line with the RBA’s expectations, prompting the central bank to once again suspend its interest rate hiking cycle.
“The monthly CPI (consumer price index) indicator for October suggested that inflation is continuing to moderate, driven by the goods sector; the inflation update did not, however, provide much more information on services inflation.”
No More Interest Rate Rise in 2024?Despite some improvements in inflation data, the RBA pointed out that a lot of uncertainty still hovered over the domestic and international economic outlooks.
“There also remains a high level of uncertainty around the outlook for the Chinese economy and the implications of the conflicts abroad,” Ms. Bullock said.
“Domestically, there are uncertainties regarding the lags in the effect of monetary policy and how firms’ pricing decisions and wages will respond to the slower growth in the economy at a time when the labour market remains tight.”
The RBA was also unsure about how household consumption would impact inflation in the next period due to the significant differences in the saving buffers of Australian households.
As such, the central bank has kept the option for further interest rate increases in 2024 open, saying such a decision would depend on economic data and the evolving assessment of risks.
The OECD cited several reasons for its forecast, including a projected lower budget deficit in 2023 caused by a sharp rise in tax receipts from businesses and households.
It then predicted that the official cash rate would drop by 0.75 percent between the third quarter of 2024 and the end of 2025.