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RBA cash rate
Are rates going up or down? What will the next RBA interest rate decision be? Get the latest cash rate predictions and insights from 40+ experts.
The Reserve Bank of Australia sets the official cash rate target. This is a benchmark rate that has a big impact on home loan interest rates, savings accounts and other credit products.
The official cash rate is currently:
4.35%
The RBA's next interest rate decision is on:
18 June 2024
Of the experts surveyed by Finder for May:
100% correctly predicted the cash rate would hold.
Graham Cooke - Head of consumer research
The inflation rate is the one number the RBA is most influenced by, so it's unlikely we'll see a rate cut until at least December, if not later.
Finder regularly surveys 40+ economists and property experts to forecast the RBA's next cash rate decision and get insights into the future of the Australian economy. Here are the most recent cash rate predictions.
Right now there's a tug of war between hoping that we've got through, and, with recent data, worrying that we haven't. That puts paid to the scope for rate cuts in the next few months but whether the next move is up or down depends on how that question is answered. But recently the likelihood that the next move is down has been taking on water.
Data clearly pointing to increased liklihood of higher near-term RBA rates with continued higher housing, fuel and energy costs to drive more rises in inflation and well above target range. RBA set to play catch-up after leaving rates too low for too long in 2023 - and can only rationally reach its target by significantly reducing demand in a still booming economy
I think the RBA will re-enter a hiking bias in the latest minutes due to the stronger than anticipated CPI numbers but I don't see them hiking yet. Equally the strong CPI and the looming tax cuts, plus whatever is announced in the Federal Budget is likely to push rate cuts out further.
We've received conflicting information about the current inflation situation in Australia. On one hand, the Consumer Price Index (CPI) increased by 1.0% in the first quarter, and over the twelve months leading to the March 2024 quarter, it rose by 3.6%, slightly higher than the expectations of most economists (3.5%). On the other hand, Australian retail sales unexpectedly declined by 0.4% in March from February, as cautious consumers reduced spending, resulting in the slowest annual sales growth in over two years. The RBA will carefully consider these factors before making any decisions regarding interest rates. I anticipate they'll hold off and wait until more data becomes available before making any decisions.
While inflation is currently on a downward trend, the current economic indicators suggest that there isn't a compelling reason for the Reserve Bank of Australia (RBA) to lower the cash rate. Inflation remains above the target range of 2-3%. The unemployment rate has seen a decrease, while the Australian dollar is depreciating, and both businesses and households seem to be adapting well to the prevailing interest rates. Hence, given the overall resilience of the economy, the RBA may opt to maintain the cash rate at its current level.
Concerns among policymakers about persistent inflation are well-founded. Our base case is for the RBA to pivot in 3Q24 but we acknowledge the increasing risk of that being pushed into 4Q24. Upside risks to inflation stem from rising fuel prices from geopolitical tensions and potential inflationary effects of the Federal Budget and Stage 3 tax cuts.
The CPI report for the March quarter was ugly. News from overseas was similarly bad. On the other hand, March retail sales were weak. The Bank will probably sit on its hands for several months. However, ongoing high government spending and the July tax cuts may combine to force a rate rise sometime this summer.
Australia is joining a growing list of economies proving that the final mile of bringing down inflation is the hardest. Having sprinted lower in the back end of 2023, headline inflation is struggling to keep that momentum going. Inflation will keep easing from here, but progress will be slow. From 3.6% in the March quarter, we see inflation ending the year at 3.2% and returning to the top of the Reserve Bank of Australia's target band of 2% to 3% in the first half of 2025. Of course, there are risks. Looming stage-three tax cuts due to start in July will keep the RBA on its toes; those tax cuts will add money to the economy at the same time as the RBA is trying to take it out. What’s more, a chunk of progress on inflation has come from temporary government rebates that will eventually unwind. Those aren’t deal-breakers for the RBA, but they will delay rate cuts. We had expected the first rate cut to come in September. Increasingly, it’s looking like we'll have to wait until December.
The Q1 inflation data were stronger than expected, pointing to a concerning path ahead for Australia's disinflation cycle. Price pressures are broad, as evidenced by the increase in trimmed mean inflation. And elevated unit labour cost growth will keep upward pressure on inflation. But we expect the RBA will stay the course and keep rates on hold until late 2024. Demand growth is clearly weak, which will eventually translate to slower inflation. A hike in response to the inflation data would be a big change their reaction function.
Inflation continues to ease and would be declining at a greater pace if not for the high cost of housing, which is being driven by necessity or, in the case of many renters, out of desperation. The Reserve Bank must not add to the cost of living pressure people are experiencing, especially vulnerable people.
The RBA has made it clear its priority is to return inflation to target. Given the March 2024 quarter Consumer Price Index (CPI) shows annual inflation remains higher than expected, I predict the cash rate will remain on hold in May.
Recent CPI figures show that service inflation is being particularly sticky which has made economists revise their earlier interest rate forecasts saying higher than expected inflation for longer.
While weaker household activity is likely to keep the RBA from lifting rates further, inflation is too stubborn for the central bank to consider lowering rates in the near future.
The recent inflation measure was slightly higher than expected, the unemployment rate has been relatively stable, and aggregate indicators suggest an economic slowdown. With stabilisation still ongoing, no changes to the cash rate are expected this round.
Inflation continues to trend lower on an annual basis; however, the higher-than-expected March 2024 quarterly CPI data result means that the RBA will be cautious about cutting rates too soon. Therefore, it's likely that the RBA will hold the cash rate steady for the majority of 2024.
The RBA know that movements in rates take 12 months to really filter through the economy. Despite a 0.1% rise in inflation, we are seeing the effects of those consistent rate rises and I don't think one slight rise in inflation is justifcation for more rises.
Embedded inflationary impact is evident. Ongoing strong population growth, very low unemployment being sustained due to fiscal expenditure, especially in non-residential construction and mining sector employment. Elevated rental price growth and housing costs will remain key drivers of inflation. These factors will keep demand sufficiently high to ward off a return to the target band.
Whilst it is good news inflation appears to be reducing year on year, the quarterly result of 1% (annualised at around 4%) is not so good. Inflation appears to be quite sticky. There is a possibility for a rate increase later in the year if inflation remains above the targeted range. More time is needed to show a sustained downward trend in inflation - we aren’t there yet. I am hopeful of a rate cut possibly end of 2024 or first quarter 2025.
Although the annual change continues on a downward trajectory, the increase from the previous quarter suggests that inflationary pressures in the economy are continuing. The RBA is likely to continue to hold. The movements in the next couple of quarters will provide a clearer indication if rate cuts may still be possible later this year or will be delayed to 2025.
The March quarter CPI data should have put paid to whatever hopes others (including the financial markets) had that the RBA might cut rates this year. The RBA was later than its peers in starting to raise rates, and has raised them by less than its peers - it stands to reason that it will therefore be later than its peers to start cutting rates. Especially when you also factor in (as the RBA will have done) that Australian households will be getting tax cuts equivalent (in terms of their impact on aggregate household cash flows) to two 25 bp rate cuts from 1st July.
Stubbornly high core inflation leaves the RBA with no choice but to maintain tight monetary policy, so we still expect the cash rate to remain at 4.35% throughout 2024. Rate cuts early next year are still likely, but their timing will be data (and demand) dependent.
Inflation continues to decline, including for services. Though the labour market is tight right now, I expect a slow rise in unemployment and weak GDP growth through to October, which would then allow a 25 basis point cut in the cash rate in November.
Inflation is still coming down so we still expect a rate cut this year, but March quarter inflation was higher than expected particularly for services inflation and so we have delayed our expectation for the first rate cut to year end.
Given low unemployment and inflation still running above the 2-3% target range, but close to the RBA's forecast, it is a near certainty that the RBA will hold at the May meeting. I also anticipate they will continue to hold until possibly December if further progress is made on inflation towards target in Q2 and Q3 and labour market tightness eases. The upcoming implementation of the Stage 3 tax cuts, which are accounted for in the RBA forecast, basically guarantee that they won't cut in the next few meetings. An increase in rates is also unlikely even if headline inflation bounces back up a bit because the RBA will anticipate the effects of past rate increases will continue to soften household spending, especially as even more homeowners come off of low fixed-rate mortgages.
One of the Reserve Bank's primary roles is setting monetary policy for the Australian economy. This involves setting the cash rate (or to use its full name, the official cash rate target).
At a technical level, the cash rate is actually the interest rate banks pay for borrowing money from each other overnight. Banks use this to manage liquidity and issue funds as needed.
Australian banks can borrow and deposit money with the RBA at just below the current cash rate target.
How the official cash rate target affects interest rates
But for the average Australian consumer, the cash rate is really useful as a broad benchmark for the interest rates on home loans and savings accounts. A high cash rate makes borrowing money more expensive and sees home loan repayments rise.
A low cash rate makes it cheaper to borrow money. This boosts borrowing and spending.
How has the cash rate changed over time?
The Reserve Bank adjusts the official cash rate target over time in response to various economic data, including:
Inflation
The unemployment rate
Global economic factors
The cash rate stayed at the then record low of 1.50% from 2016 to 2019, when the RBA lowered it further in response to low inflation and slightly higher unemployment.
Then as the Covid-19 pandemic began to hurt the Australian economy the RBA dropped the cash rate even further. This was to make borrowing cheaper and stimulate a struggling economy. The cash rate hit the record low of 0.10% during this time.
Now, with inflation soaring the RBA has lifted the cash rate very quickly to try to slow demand and curb price rises.
The graph on the left below shows movements in the official cash rate over time. And the graph on the right shows the market's lowest home loan rates. You can see how the market responds by raising or lowering rates broadly in line with the RBA's decisions.
How does the RBA's cash rate decisions affect your finances?
The RBA can do 3 things with the cash rate: Raise, lower or hold the cash rate at its current level.
If the RBA lifts the cash rate
When the cash rate rises, most lenders pass on the rate rise to borrowers on variable rate home loans.
If the cash rate rises by 25 basis points, then most borrowers will see 25 basis points added to their home loan's interest rate.
If you have a fixed rate home loan nothing changes. Your rate is locked in for the duration of the fixed period.
When the RBA lowers the cash rate, most lenders pass on some if not all of the cut to borrowers on variable rate home loans.
Banks also lower rates on savings accounts and other products.
If you have a home loan, it's a good idea to check if your lender has actually passed on the rate cut to you. If it hasn't, you may need to switch.
If the RBA holds the cash rate
A hold decision means the cash rate isn't changing this month. This means that your home loan or savings account rate likely won't change. You don't really have to do anything.
But banks and lenders change interest rates all the time for various reasons even if the RBA doesn't move the cash rate.
Calculate how much a cash rate rise will impact your home loan repayments
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Enter your loan amount, current interest rate and the latest cash rate increase to quickly estimate how much your monthly repayments will increase.
Example: how changes to the cash rate can change your loan repayments
You have a $450,000 home loan with a variable interest rate of 5.00%. It's a 30-year loan term with principal-and-interest repayments.
Your monthly repayments are $2,416.
⬆️ If the cash rate rises by 25 basis points your interest rate would increase to 5.25%. Your monthly repayments would now be $2,485. This would cost you an extra $69 a month or $828 a year.
⬇️ If the cash rate decreases by 25 basis points your interest rate would fall to 4.75%. Your monthly repayments would now be $2,348. This would save you $68 a month or $816 a year.
More questions about the RBA cash rate
Lenders are free to change interest rates on their products whenever they want. The cash rate is a big influence on rates, but there are many other factors. This includes a lender's own funding costs, the amount of deposits the lender has and how competitive it wants to be to attract new customers.
The RBA changes the cash rate target based on a range of factors including inflation, the performance of the Aussie dollar, unemployment, the housing market, and Australia's Gross Domestic Product (GDP).
For example, if inflation rises above the target rate it means that Australians are spending their money too freely and prices are increasing too rapidly. But if the RBA raises interest rates to make it more expensive to borrow money, the economy will settle and price increases will slow down.
Conversely, the RBA will drop interest rates if inflation is too low and the economy is stagnating, encouraging more Australians to spend more money and stimulate economic growth.
The Reserve Bank of Australia is the country's central bank. The RBA's monetary policy has three key objectives which are set out in the Reserve Bank Act 1959:
The stability of the currency of Australia.
The maintenance of full employment in Australia.
The economic prosperity and welfare of the people of Australia.
Setting the official cash rate is one of the bank's key tools to influence monetary policy, inflation and the broader Australian economy. The bank's board meets on the first Tuesday of every month except January to set the cash rate. The RBA will either cut, raise or hold the cash rate.
The RBA's board of governors typically meets 11 times a year, on the first Tuesday of every month except January. It is here that the board makes a decision on the official cash rate target, which it announces at 2:30pm that day.
Starting in 2024, the RBA board will meet 8 times a year to decide the cash rate level. This means fewer changes to the cash rate than in previous years.
However, the RBA can alter the cash rate at any time. This is rare, but can happen. In March 2020, in response to the onset of the COVID pandemic, the bank cut the cash rate twice. Once at the scheduled meeting and then again mid-month at a special emergency meeting.
Check out more RBA news and Finder's RBA survey press releases
The May cash rate decision was no surprise for most economists, but borrowers waiting for their interest rates to fall may have to wait longer than was expected a couple of months ago.
The RBA has held the cash rate for the third time in a row while the cost of living pressure experienced by Aussie households continues to sit in the ‘extreme’ range.
Experts and economists have shared their key economic and financial predictions for 2021 as part of the latest Finder RBA cash rate survey. All 40 correctly predicted that the cash rate would remain at 0.10% this month.
Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification.
The RBA has held the cash rate for the third time in a row while the cost of living pressure experienced by Aussie households continues to sit in the ‘extreme’ range.
The May cash rate decision was no surprise for most economists, but borrowers waiting for their interest rates to fall may have to wait longer than was expected a couple of months ago.
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When the RBA decreases the cash rate , does it mean it prints more money to increase money supply and thereby decreasing the borrowing rate. And if that is the case, does increasing the cash rate mean that the RBA has to extinguish some of the money supply thereby reducing the money available to borrow. I am assuming that RBA can’t just simply say the cash rate is this much, it has to increase/decrease money supply at the backend to make sure the cash rate stays at whatever level it wants to stay at.
The cash rate determines the interest rate lenders can charge when lending money to each other at short notice (also called the overnight cash rate). Lenders and banks are always moving money around to cover different investments and expenses, including funding for home loans.
So the cash rate affects their costs, and they pass this onto borrowers. Changing the cash rate target does nothing to the amount of money in the economy. It affects the cost of borrowing and lending money.
The RBA does in effect create money sometimes, in a process called quantitative easing. This involves purchasing bonds from investors at a favourable rate, freeing up investor cash to go elsewhere in the economy. This is different to the cash rate.
To know more information on your questions, you can fill in your email address in the box provided and you’ll be updated on RBA’s decisions on the official cash rate target.
While we provide you with general information, please know that we don’t stand as a representation for RBA or any company featured on our site.
Thanks for getting in touch with finder. I hope all is well for you. :)
Unfortunately, we are not in the best place to make a prediction. However, you might get an idea whether the RBA cash rate will rise or fall by looking at the factors that affect it. These factors may include:
This is a nice question. Domestic financial conditions remain expansionary. There has been some tightening in short-term
money markets, which has flowed through to a small increase in funding costs for a range of financial institutions and businesses. However, borrowing rates remain low for households and businesses. Growth in housing credit has eased since mid last year, particularly for credit extended to investors, while growth in business debt has remained moderate. The Australian dollar remains within its narrow range of the past two years. Financial market prices suggest that the cash rate is expected to remain unchanged this year and to increase around mid 2019. If you are eager to learn more about the domestic financial condition according to RBA, refer to the Domestic Economic Conditions file.
As of the moment, most of resident rate experts predict that rates will be the same. The cash rate target is released on the first Tuesday of every month except January.
Currently, there are multiple factors that need to be considered and due to the volatility of these factors, it is a bit hard to conclude whether they’ll leave the rates unchanged for the next few months or not.
If you have further inquiries, you may contact:
Media and Communications
Secretary’s Department
Reserve Bank of Australia
SYDNEY
Phone: +61 2 9551 9720
Fax: +61 2 9551 8033
Email: rbainfo@rba.gov.au
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When the RBA decreases the cash rate , does it mean it prints more money to increase money supply and thereby decreasing the borrowing rate. And if that is the case, does increasing the cash rate mean that the RBA has to extinguish some of the money supply thereby reducing the money available to borrow. I am assuming that RBA can’t just simply say the cash rate is this much, it has to increase/decrease money supply at the backend to make sure the cash rate stays at whatever level it wants to stay at.
Hi,
The cash rate determines the interest rate lenders can charge when lending money to each other at short notice (also called the overnight cash rate). Lenders and banks are always moving money around to cover different investments and expenses, including funding for home loans.
So the cash rate affects their costs, and they pass this onto borrowers. Changing the cash rate target does nothing to the amount of money in the economy. It affects the cost of borrowing and lending money.
The RBA does in effect create money sometimes, in a process called quantitative easing. This involves purchasing bonds from investors at a favourable rate, freeing up investor cash to go elsewhere in the economy. This is different to the cash rate.
I hope this helps.
Regards,
Richard
how long can AUD interest rate remain Low…..?
how soon will the AUD follow the US FED Rate Hike…….?
thank you
Hi Octo!
Thanks for getting in touch!
To know more information on your questions, you can fill in your email address in the box provided and you’ll be updated on RBA’s decisions on the official cash rate target.
While we provide you with general information, please know that we don’t stand as a representation for RBA or any company featured on our site.
Hope that clarifies!
Cheers,
Nikki
Do you think the cash rate will stay the same at the June RBA meeting?
Hi Taneesha,
Thanks for getting in touch with finder. I hope all is well for you. :)
Unfortunately, we are not in the best place to make a prediction. However, you might get an idea whether the RBA cash rate will rise or fall by looking at the factors that affect it. These factors may include:
– Household debt
– Inflation
– Wage growth
– Consumer Confidence Index
– Unemployment
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
What do you think that how the international economic condition influence the cash rate?
Hi Brook,
Thank you for getting in touch with Finder.
This is a nice question. Domestic financial conditions remain expansionary. There has been some tightening in short-term
money markets, which has flowed through to a small increase in funding costs for a range of financial institutions and businesses. However, borrowing rates remain low for households and businesses. Growth in housing credit has eased since mid last year, particularly for credit extended to investors, while growth in business debt has remained moderate. The Australian dollar remains within its narrow range of the past two years. Financial market prices suggest that the cash rate is expected to remain unchanged this year and to increase around mid 2019. If you are eager to learn more about the domestic financial condition according to RBA, refer to the Domestic Economic Conditions file.
I hope this helps.
Have a great day!
Cheers,
Jeni
What do you think will be the next move for RBA on cash rate and when?
Thank you!
Hi Rob!
Thanks for the comment.
As of the moment, most of resident rate experts predict that rates will be the same. The cash rate target is released on the first Tuesday of every month except January.
You can follow the updated RBA forecast through our website.
Hope this helps.
Cheers,
Jonathan
Thanks Jonathan, I meant in the longer term, 6-12 months.
Hi Rob!
We appreciate your follow-up.
Currently, there are multiple factors that need to be considered and due to the volatility of these factors, it is a bit hard to conclude whether they’ll leave the rates unchanged for the next few months or not.
If you have further inquiries, you may contact:
Media and Communications
Secretary’s Department
Reserve Bank of Australia
SYDNEY
Phone: +61 2 9551 9720
Fax: +61 2 9551 8033
Email: rbainfo@rba.gov.au
Hope this helps.
Cheers,
Jonathan