RBA holds but 42% of experts say another rate rise is coming soon

New governor Michele Bullock announces her 1st cash rate decision with a welcome hold.

There was no question this month amongst Finder's economists - the RBA was going to hold. Despite a small bump in inflation figures, the national cash rate remained at 4.10%.

100% of the economists that Finder surveys each month predicted this would be the case. It's the 4th cash rate hold in a row, which borrowers will be welcoming after the rate rise onslaught since May 2022.

Mortgage holders have experienced 12 rate rises in that time, amounting to increases worth 4%.

This is new governor Michele Bullock's first cash rate announcement as she took over as head of the board on 18 September. She takes over from Philip Lowe who oversaw the RBA for the previous 7 years.

Why were economists so sure the rate would hold?

The whole point of the rising cash rate has been to bring down inflation. Inflation had begun trending very steeply upwards in the first half of 2022 and the RBA went on the attack to reduce peoples' spending by increasing the amount they'd need to spend on mortgage repayments.

Inflation peaked in December 2022 at 7.8%, but has been steadily falling since then. The latest quarterly inflation figure for June 2023 is at 6%.

While the RBA's target for inflation is between 2-3%, the RBA knows it can take a few months for the rate rises to have an impact. So, it makes sense that the RBA would pause while it waits to see what the inflation figure does.

UNSW economist Nalini Prasad, who is on the Finder economist panel, said as much in her commentary: "The latest inflation numbers indicate that inflationary pressures are easing in the economy. I think the RBA will adopt a wait and see approach and keep the cash rate steady."

If you look more closely at the figures though, there was a small uptick in the monthly inflation percentage in August. That wasn't enough to influence the RBA decision, suggests Matthew Greenwood-Nimmo from University of Melbourne.

"The latest monthly inflation figures are broadly in line with expectations and do not provide substantial new information that would justify a rate change prior to the next quarterly data release," he said.

When can I expect a rate cut?

If you're waiting for a rate cut, you could be waiting for a long time. Inflation might be on the way down but economists predict it will be "sticky" and "slow to get under 3%".

In fact, some economists believe we might see another rate increase before rates start falling again.

While 48% believe the cash rate has peaked at 4.10%, 42% believe the rate will peak at 4.35% or even as high as 4.60%.

Of those who predict further rate rises, they expect this to happen between December and February. Some expect another rate rise as early as November.

Peter Boehm, from Pathfinder Consulting, said, "If underlying inflation holds at this level for another month, the chances of a rate increase in November are almost certain."

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