"There is still a risk that inflation will take too long to return to target"
The Reserve Bank of Australia (RBA) is unlikely to cut the cash rate within the next six months due to persistent inflationary pressures, according to central bank governor Michele Bullock (pictured).
Speaking to reporters in Sydney, Bullock acknowledged the financial strain on households and small businesses but emphasised the need to control inflation.
“I understand that this is not what people want to hear,” Bullock said. “I know there are many households and small businesses that are struggling with interest rates. Many people are doing it tough, and we’re very conscious of that.
“But the best thing we can do is to bring inflation back down to target because we can’t let inflation get away. It hurts everyone, it particularly hurts people on lower incomes. This is why we need to stay the course on bringing down inflation until it’s sustained in the band of 2 to 3%.”
The RBA on Tuesday left the cash rate unchanged at 4.35%, a 12-year high, signalling no immediate relief from the aggressive rate hikes implemented to curb inflation. The RBA’s decision reflects concerns that inflation, currently above the desired target range, will remain high.
“There is still some considerable uncertainty about the outlook, and I’d want to highlight here that there is still a risk that inflation will take too long to return to target,” Bullock added.
“The recent CPI data were broadly in line with our expectations and our forecasts, but make no mistake, inflation is still too high, and the RBA board does remain concerned about the degree of excess demand in the economy.”
Australia’s four largest banks are offering differing predictions on when the RBA will initiate its first interest rate cut in the current cycle.
The Commonwealth Bank of Australia (CBA) and Westpac are forecasting a rate cut as early as November this year, suggesting they believe inflationary pressures may ease sooner than expected.
In contrast, ANZ is more conservative in its outlook, anticipating the first cash rate cut in February 2025, while the National Australia Bank (NAB) is projecting an even later timeline, predicting the first rate cut will occur in May 2025.
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