TradeEdge-Lonton Wealth Management Center: When did the RBA start cutting interest rates?

In December last year,TradeEdge the Reserve Bank of Australia (RBA) announced a pause in interest rate hikes, keeping the rate steady at 4.35%. However, its officials remained open to the possibility of further hikes in the coming year. 

Nevertheless, data released this week has prompted insightful discussions among economic analysts about the possibility of the next interest rate cut rather than a hike. After experiencing 13 interest rate hikes over the past 19 months, will the cash rate be reduced in 2024?"

"At the final meeting of 2023, the Reserve Bank of Australia announced it would maintain the current interest rates unchanged. Governor Michele Bullock stated in a post-meeting statement that there might be further 'monetary policy tightening' to 'ensure inflation returns to target within a reasonable timeframe.' She also mentioned that the direction of interest rates would depend on further ‘data and evolving risk assessments.’

The latest Consumer Price Index shows that Australia's inflation rate is lower than economists' expectations, sparking discussions among the public about whether the rate hike has temporarily halted. Economists anticipated a 4.4% increase in prices, but the latest data from the Australian Bureau of Statistics indicates that the inflation rate slowed from 4.9% in October to 4.3% in November.

Some market analysts told SBS News that unless there is a significant economic shift, the slowdown in inflation is likely signaling the end of the tightening cycle by the Reserve Bank of Australia.”

"When will the interest rate be reduced?

Henry Smith, head of the Australian market at Lonton Wealth Management, stated that the inflation data 'confirms discussions that there will be no rate hike in February, or in this current cycle.' 

'We believe that we have reached the peak of interest rates now, and it is likely to decline in the second half of 2024,' he said. He predicts that the rates may start to decrease in September. 

'The Reserve Bank of Australia would want to have inflation under effective control before starting any rate cuts,' he added. 

Smith noted that mortgage holders were 'immediately affected by the Reserve Bank of Australia's decision to hike rates, but they might breathe a sigh of relief later in 2024.' 

However, he also pointed out that future rate cuts could have some negative impacts. 'On the other hand, when rates are lowered, borrowers benefit, but savers suffer losses, and many savers are retirees,' he added. 

According to the latest inflation data, Smith suggested that the rates may start to decrease in August."

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