Investing.com - In a move that is likely to bring some respite for mortgage holders, Australia's Reserve Bank (RBA) has decided against further increasing its official cash rate at Tuesday's board meeting — marking only the second occasion in 14 meetings where it hasn't opted for an increase.
The RBA kept its official cash rate steady at 4.1%, which remains the highest it has been in over a decade. Projections regarding this decision were split down the middle among economists; half had anticipated this breather while others predicted another rise by 25 basis points.
Speculations about delaying another surge in rates gained momentum following insights from June’s RBA board meeting minutes which indicated last month’s decision between raising or maintaining stability was contentious and narrowly decided.
Recent data from The Australian Bureau of Statistics added weight to these speculations as well. Their latest consumer price index numbers revealed headline inflation dropped significantly to 5.6% in May - marking its lowest point in just over twelve months even though underlying inflation saw minor reductions.
Voices advocating restraint included Warwick McKibbin, a former member of RBA's board who warned about an impending global “deflationary shock” resulting from recovery efforts post-Covid pandemic and Russia-Ukraine conflict disruptions within supply chains globally.
Excluding April and July, there have been twelve instances since May 2022 when RBA chose to tighten monetary policy by raising their cash rates. However, experts believe that Tuesday’s pause may not last long with predictions hinting towards at least one more quarter-point rise bringing it up to around 4.35% before reaching its peak in upcoming months.
Whether we'll see more hikes initiated by RBA come August or if they choose to extend their current hiatus largely depends upon economic indicators' strength moving forward. Crucial figures influencing this will be employment stats due out on July 20th along with consumer price index data set for release on July 26th before next month's scheduled board meeting.