RBA Newsflash: March 2024

Updated March 19th 2024

The Reserve Bank has announced the official cash rate during its March meeting.

The Reserve Bank of Australia (RBA) has decided to leave the official cash rate unchanged at 4.35% for its March monetary policy meeting.

Ahead of the decision, the major bank economists unanimously expected the cash rate to hold steady.

The ASX rate tracker as of 18 March had predicted 95% “no change” and a 5% chance of a decrease to 4.1%.

Speaking during the House of Representatives standing committee on 9 February, RBA governor Michele Bullock stated the Reserve Bank may consider cutting interest rates before inflation hits the target bank of 2-3%.

However, the board must still be confident that inflation will return to the target range before these rate cuts occur, Bullock clarified.

Currently rate cuts are expected to begin during the August / September monetary policy meeting.

The RBA leaving the cash rate unchanged came as “no surprise” due to the lack of “any meaningful data pointing to the economy continuing to overheat and further threaten inflation rises.

In fact, National Accounts data released earlier in the month provided solid evidence that monetary policy tightening is having its intended impact on domestic demand.

While interest rates remain at 4.35%, consumers will continue to hold back on spending on discretionary items, and this will further negatively impact retail trade, but overall, will help bring inflation down.

It’s likely the cash rate has peaked in this current tightening cycle.

Home prices in 2023 remained resilient to the higher interest rate environment and the improvement in conditions that materialised through 2023 has continued in 2024.

The decision to hold will “maintain both buyer and seller confidence” with the next move for interest rates “likely to be down.

Despite a weaker outlook for the economy, the positive tailwinds for housing demand and a slowdown in the completion of new homes are likely to offset the impact of reduced affordability and a slowing economy.

As a result, prices are expected to lift further in the months ahead, particularly while the expectation remains that interest rates will move lower in late 2024.