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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:
7 May 2024
Of the experts surveyed by Finder for March:
100% correctly predicted the cash rate would hold.
Graham Cooke - Head of consumer research
The question is now not if the RBA will cut in 2024 - but when? A couple of months ago, August was looking like the earliest possible month for a cut. That's now moving closer to July.
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.
Yet unlikely! My forecasts using monthly and weekly, domestic and foreign series indicate the beginning of a downward trend in the cash rate. However, the uncertainty around this trend remains large enough to suggest a HOLD decision. For the first in my forecasting exercise term structure of interest rates models for monthly data exclude the hold decision from the forecast interval in favour of a cut. Other groups of models and those for other data balance this effect out in my pooled forecast, though. These forecasts are available at https://forecasting-cash-rate.github.io/
I think the cash rate is likely to be maintained at the current level for some time, until the economic climate justifies a rate change. It seems likely that the next change to the cash rate is likely to be cut, but we're not at the stage to see that happen yet.
The latest economic data published by the Australian Bureau of Statistics shows that the economy is slowing, inflation is easing and households are cutting back on spending. The cumulative effect of these factors will likely give the RBA reason to keep the cash rate steady.
With inflation trending lower and slack apparently building in the labour market, there's little need for the RBA to tighten any further. If the economy continues to trend in this direction, rate cuts could be coming by the 2H of the year.
Inflation continues to abate, while the outlook for the economy weakens. Rate hikes are now off the table. However, elevated migration, coming tax cuts and ongoing wage increases will stop the RBA from easing back on monetary policy until later this year.
The RBA is likely to still be waiting for more confidence regarding the fall in inflation at its March but the combination of slowing growth, rising unemployment and falling inflation should see it in a position to start cutting at its June meeting (if not then in August).
Australia’s fight against inflation is ahead of schedule. Headline inflation dropped to 4.1% year on year in the final three months of 2023—a monumental improvement from 5.4% in the September quarter. On top of that, core inflation, which strips out volatile movements, fell to 4.2% from 5.1%. Meanwhile, annualised inflation over the six months to December sat just 0.5 percentage point above the RBA’s 2% to 3% target range. Better still, some of the stickiest drivers of inflation are being tamed. In the December quarter, service inflation dropped to its lowest year-on-year reading since September 2022, while nondiscretionary inflation fell to its lowest since December 2021—before the RBA began its tightening cycle.
Economic conditions will continue to weaken for the Australian economy, with slow growth and rising unemployment throughout 2024. Inflation is also likely to continue falling, but could remain above the target range until 2025. The RBA will continue to be concerned about services inflation and, in my mind, be unlikely to cut until they see further progress on lower services inflation and also start to see rate cuts in the United States and other countries. I believe a weakening of economic conditions and progress on inflation will see the RBA begin rate cutting in the second half of 2024, possibly with the September meeting.
Most indicators suggest a significant downturn in economic activity, with recent inflation measures also indicating a decline. Given the cautious approach of the RBA, it will likely wait for a few more months to confirm these indicators before considering lowering the cash rate.
They should cut now, but they'll leave it, because it's part of RBA psychology not to admit that immediate past changes were a mistake, which is what a cut now would be interpreted as.
Despite a 3.4% rise in the CPI over the 12 months to January 2024, the RBA is expected to maintain the cash rate at 4.35% in March. Further, the monthly CPI increases to 4.1% when excluding volatile items. Concerns arise from the uptick in essential items like housing costs, food, non-alcoholic beverages, and financial services, mainly impacting low-income households in Australia. These factors provide a rationale for the RBA to retain the cash rate before considering a rate cut around the middle of the year.
The RBA will likely retain its tightening bias in March before moving to a neutral position in May (after the next quarterly CPI data) but no rate cuts until November at the earliest. A more patient approach delivering 5 cuts next year remains our basecase forecast, while earlier cuts (in spring) may only result in a couple of cuts.
Inflation is closing in on the RBA’s target band. The final descent will be slow and turbulent. By mid-year, global and Australia’s growth will weaken, which should lead to some monetary policy easing from August.
The economy remains robust enough, and inflation is still trending slowly towards the target. Current settings are appropriate and don't warrant changes through at least H2 this year.
With negative per capita GDP and overall GDP flatlining, Australia is effectively in a recession. Cost of living pressures, falling standards of living and falling optimism about the future all point to at least a hold and I suggest a reduction in interest rates later in the year. It would seem the RBA's November 23 rate increase was overkill and there are no tangible signs that cost of living prresssures will be eased anytime soon. Rate reductions are now the only way to go given the Federal Government's inability to address fundamental cost of living issues.
The latest data shows that households, businesses and the broader economy are starting to feel the impact of last years interest rate increases. Spending has decreased, unemployment is rising and inflation is falling. Although the economy hasn’t softened sufficiently for the RBA to implement rate cuts, the next anticipated move, following a period of unchanged rates, will likely be a decrease
Mortgage pain is becoming more acute for households as the year progresses. Evidence of households cutting back in spending in retail and other sectors is showing through and inflation is trending down steadily. Likely that RBA may be able to start cutting cycle in Aug or Sept. But still a careful balancing act not to re-ignite the economy too quickly.
Slowing inflation and minimal economic growth mean the RBA is expected to consider cutting rates but should this occur, it’s more likely to begin later in the year, once these trends are more established.
The Bank is making decent progress in slowing down inflation. Accordingly, the economy continues to slow. By the same token, services inflation is sticky and the Bank is traditionally inertial. For example, the Bank is unlikely to cut before the Fed. Indeed, it remains possible that one more rate rise will be necessary, given that fiscal policy is looking increasingly expansionary.
Inflation is on the right track. But it is still above target and the next segment of the disinflation will be more of a struggle as cost of living subsidies roll off and upward pressures on services prices persist. The RBA will take a wait-and-see approach through most of 2024.
Inflation remains above the RBA's target band despite moderating in recent months. House prices appear to have significantly decoupled from incomes and shrugged off the rate increases to date. As long as low unemployment (effectively full employment) persists, the cash rate is unlikely to be reduced.
Not enough evidence yet but the economy is soft and inflation will probably fall in line (or at a faster pace) than the RBA projects, allowing a cut in the second half of the year.
I think the RBA has decided it is willing to tolerate inflation being above its target for longer than its 'peer' central banks are willing to allow inflation being above their respective targets, in order to preserve as much as they can of the gains made in recent years in reducing unemployment and under-employment. That's one reason why they haven't raised their cash rate as much as their peers (in the euro zone, UK, Canada, US and NZ). But the corollary of having been later to start lifting rates, and having lifted them by less, than their peers, is that the RBA will also be slower to start cutting rates than their peers. And even more so when you also take into account that Australian households will, on 1st July, be getting income tax cuts which, in terms of their impact on aggregate household cash flows, are equivalent to two 25 bp rate cuts - which households in the euro area, UK, Canada, US and NZ will not be getting.
The most recent inflation data came in much softer than many commentators expected, which was much to everyone's relief and the RBA no reason to raise interest rates, but it's still too early to drop rates. There are lots of different ways to look at how inflation is coming down, but if you look at the most recent quarter and annualise it, we're now at the bottom of the RBA's target range.
What is the official cash rate?
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.
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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
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.
The Reserve Bank of Australia (RBA) today announced that it has slashed the cash rate by 15 basis points to a new historic low of 0.10%. Results from Finder's RBA Cash Rate Survey show that 67% of experts surveyed correctly predicted a rate cut.
Experts are predicting that the Reserve Bank of Australia (RBA) will announce a second rate cut for 2020 at the final meeting of the year, according to Finder.
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.
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