RBA pulls the reins on Melbourne Cup day: What happened?
Despite some brief optimism over the last month, the cash rate will be staying where it is.
The RBA has just announced it's keeping the cash rate on hold at 3.6%.
You might have heard some buzz over the last few weeks that we could be expecting a rate cut. So why the sudden shift?
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Why everyone expected a cash rate cut…
A month ago, the market was fairly confident that November would be a cash rate hold. In fact, here at Finder we recorded a video explaining that there'd likely be no cash rate cuts for the rest of the year.
Just a couple of days after that, before we'd even had the time to post the video, Australia's unemployment figures were released. Unemployment is a part of the economy that the RBA looks at when it's deciding whether to move the cash rate.
The unemployment data was higher than expected. This started a wave of speculation that the RBA would be forced to cut the cash rate again.
And then why everyone didn't…
At Finder we went into preparation mode for an influx of rate changes and figuring out what content would be best placed to support borrowers as they kept an eye on rates.
But we also knew that the RBA wouldn't only be looking at unemployment. Last week, the ABS released the latest inflation figures, which show us how much the cost of things have changed in the last year.
That came out as 3.2%, much higher than anyone wanted. The RBA is trying to keep inflation between 2-3% and the only reason we saw rate cuts earlier this year is because it had managed to do that.
Not happy with the cash rate decision?
Several lenders have still been cutting their interest rates.
What does everyone think now?
We know that when inflation gets too high, the RBA will start increasing the cash rate. The 3.2% figure is not what we wanted to see, but probably not high enough that the RBA would jump to increasing the cash rate so quickly.
The RBA typically takes its time to respond to any market changes. The cash rate is likely to stay where it is until the RBA can get a clearer read on how inflation is tracking.
Although it's probably too early to tell, 66% of Finder's panel of economists and industry experts believe we'll see at least 1 more rate cut in the next 12 months. Most people think that it'll be in February, but we'll have to see what the next lot of inflation data is.
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