10 Dec 2024
The Reserve Bank of Australia (RBA) Board has decided to leave the cash rate unchanged at 4.35% at its December meeting, as expected.
December 2024 - Article provided by PSK's Chief Investment Officer Chris Lioutas.
The Reserve Bank of Australia (RBA) Board has decided to leave the cash rate unchanged at 4.35% at its December meeting, as expected.
Leading into the meeting, May 2025 was firming as the date in which the RBA would most likely make its first rate cut. However, recently released data has provided optionality for an earlier rate cut.
Whilst the general tone was broadly consistent with the November statement, there were some subtle changes including:
- The Board gaining some confidence that inflationary pressures are declining, but risks remain.
- Recent data on economic activity has been softer than expected, with a specific callout of the most recent economic print being the slowest since the early 1990s.
- Wage pressures have eased more than expected recently.
- Both incomes and consumption had recovered a little slower than forecast in the September quarter, but more recent information suggested a pick-up in October and November.
A more noticeable change was the removal of a rather hawkish statement in the November statement regarding the "need to remain vigilant to upside risks to inflation and the Board is not ruling anything in or out". This appears to be a function of the recent weak economic print whilst also laying the path for a rate cut at either of their next two meetings in 2025.
Following the announcement, Australian equities rose, the AUD/USD fell, and Australian bond yields fell (prices rose). Fair to say investors took notice of the removed statement above.
As always, if you have any questions or your personal circumstances have changed please do not hesitate to contact your financial adviser
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