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In somewhat positive news for mortgage holders and Australians, annual inflation fell to 4.9% in the 12 months to October, a significant decrease from the year to September, where inflation was 5.6%. It’s a long way from the peak of inflation in December 2022, which reached 8.4%!
The new inflation figures could be positive signs that contribute to a halt in interest rate rises as we head into the holiday season.
The figure is lower than market predictions and brings inflation to its lowest reading since July. Essentially it means inflation is slowing down at a sooner-than-expected rate.
Could this indicate that the cash rate will remain at 4.25% for the final RBA meeting of 2023 next week? The major banks certainly think so, with all four majors believing the RBA will hold rates in its final meeting for the year. CommBank, NAB, ANZ and Westpac have made predictions for the ‘cash rate peak in 2024’ (ie, how high the cash rate will get next year).
The ‘Big Four’ cash rate peak predictions for 2024
|Predicted Cash Rate Peak (2024)
Can we expect rates to come back down in 2024?
Leading economists at NAB and Westpac believe rates will likely hold steady until December 2024. The RBA will likely not start to ease interest rates until inflation returns to the target range of 2-3%, as they’ve pointed out in their monthly press statement throughout 2023.
RBA Governor Michele Bullock drew some headlines this week, stating that despite the “political noise” surrounding the record setting increase in interest rates over the past 18 months, Australian households are “in a pretty good position.”
Speaking at an overseas conference earlier this week, Bullock said: “We have, like other countries, raised interest rates much more quickly than we have in the past, and that has created, in fact, a lot of political noise and a lot of noise from the general public,” she said.
“People are very unhappy. But what I’d like to highlight here is though, despite that noise, households and businesses in Australia are actually in a pretty good position. Their balance sheets are pretty good.”
“Those who are coming off very low fixed rate mortgages, they’re managing quite well,” she said.
“And all the indications from the banks, and all we hear from the banks, is these households are doing fine.”
Bullock did make note of the fact that rate hikes are causing “challenges” as the impacts of such increases are being shared unevenly throughout the nation.
Make sure to tune into the final Property Insights of 2023, with Mark Bouris and Stephen Koukoulas sitting down to talk all things interest rates, the economy and the outlook for 2024, only on the Y Home Loans App.