Punters were left disheartened by the Reserve Bank of Australia’s (RBA) decision to hold rates steady on Melbourne Cup Day.
Following the release of September's Consumer Price Index (CPI) data, the RBA announced it would keep the cash rate unchanged at 4.35% for the eighth consecutive time. This decision aligned with market expectations, which widely anticipated a rate hold.
The RBA’s last rate increase occurred in November of the previous year, marking its 13th hike since initiating the tightening cycle in May 2022. Since that time, trimmed mean inflation has eased from 5.1% year-on-year to 3.5%, in line with the RBA's August forecast. However, this slower-than-expected progress has kept the central bank cautious about any premature rate cuts.
September’s CPI figures have now pushed expectations for potential rate cuts into 2025, underscoring persistent concerns about core inflation. Despite the overall inflation rate easing to 2.8% over the 12 months to September, core inflation remains above the RBA's target range.
Commenting on the CPI data, Gareth Aird from the Commonwealth Bank of Australia noted that while the September quarter showed continued disinflation, it had not advanced as quickly as hoped on an underlying basis. “We no longer expect the RBA to cut the cash rate in December 2024," Aird stated, adding that February 2025 is now the likely timing for a 25-basis-point cut.
Similarly, Andrew Canobi of Franklin Templeton Fixed Income suggested a 2024 rate cut was unlikely, pointing to strong core inflation and a resilient labor market as factors supporting a delayed easing.
Dwyfor Evans of State Street Global Markets also highlighted enduring inflationary pressures across sectors such as healthcare, recreation, food, and insurance. These pressures, he warned, keep inflation persistently above the RBA’s 2–3% target, making early 2025 a more realistic outlook for rate cuts.
Evans remarked, “Consensus expectations of Q3 disinflation cannot overshadow the fact that underlying price pressures in Australia remain high,” anticipating that the RBA might signal early 2025 as a probable timeline for rate easing in its upcoming monetary policy statement on November 5.
Rick Maggi CFP, Westmount Financial, Financial Adviser (Perth)