RBA interest rate announcement and commentary - February 2024

The Reserve Bank of Australia (RBA) has decided to leave the cash rate on hold at 4.35%

Inflation has been easing recently, particularly in the last three months of 2023. However, it's still relatively high at 4.1% (the usual target is 2%-3%). The prices of goods have been rising less rapidly than expected by the Reserve Bank of Australia (RBA) back in November. This easing is due to the resolution of earlier disruptions in the global supply chain and a decrease in the demand for goods within the country. On the other hand, the cost of services has been decreasing at a slower pace, in line with what the RBA anticipated earlier. This indicates ongoing strong demand in the economy and pressure on costs, both for labor and other expenses.

In a statement the RBA state "Higher interest rates are working to establish a more sustainable balance between aggregate demand and supply in the economy. Accordingly, conditions in the labour market continue to ease gradually, although they remain tighter than is consistent with sustained full employment and inflation at target. Wages growth has picked up but is not expected to increase much further and remains consistent with the inflation target, on the assumption that productivity growth increases to around its long-run average."

Looking ahead, the economic outlook remains uncertain. While there are positive signs, such as improvements in goods price inflation overseas, there are also ongoing concerns, especially regarding persistent inflation in services. Additionally, uncertainties linger regarding the Chinese economy and conflicts in regions like Ukraine and the Middle East. Domestically, there's uncertainty about how businesses will adjust their pricing and wages amidst slower economic growth and tight labor market conditions.

The main goal for the RBA is to bring inflation back within its target range of 2–3%. This is important for ensuring price stability and full employment, which are part of the RBA's mandate. However, it's expected to take some time before inflation reaches this target range consistently. The RBA will closely monitor economic data, including global trends and domestic demand, to determine the best path for interest rates. They are committed to taking necessary actions to achieve their inflation target, which may include further adjustments to interest rates in the future.

It's probably a good time to review your loans.

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General advice warning
‍The information provided is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.