Inflation sits at 3.8% as the RBA prepares its August 2024 decision.
The Consumer Price Index (CPI) rose 1% in the June 2024 quarter, pushing the annual rate to 3.8%. With inflation above the RBA’s 2-3% target band, the question heading into the August 2024 board meeting is whether the RBA holds, hikes, or gives any fresh guidance on the timeline to cuts.
The RBA cash rate prediction for August 2024 from most economists and market analysts is a hold. The trimmed mean inflation measure, which strips out the most volatile items, also landed at 3.8%, a level that signals ongoing pressure but not an emergency that demands an immediate response.
Here is what the data shows, what experts are saying, and what the August decision means for your home loan.
What the CPI data shows
The June 2024 quarter CPI print highlighted that price pressures remain broad rather than concentrated in one area. The categories with the largest increases were:
The housing component is worth pausing on. Higher interest rates are themselves a contributor to higher housing costs, creating a feedback loop that makes the RBA’s task more complicated. Raising rates further to bring down inflation could actually push the housing cost component of CPI higher in the short term.
This is one reason the RBA was widely expected to hold in August rather than hike. The case for waiting to see more data was stronger than the case for acting immediately.
Expert views on August 2024
The broad consensus among economists and brokers was that the August 2024 meeting would result in a hold at 4.35%, where the cash rate had sat since November 2023.
The headline CPI came in just below 4.0%, which many analysts had flagged as a likely trigger point for a hold decision. Trimmed mean inflation at 3.8% was also consistent with a hold rather than a hike.
If the RBA had decided to move, a modest 25-basis-point increase was seen as the most likely outcome. However, most expected the board to wait for the next quarter of data before making any changes, particularly given the complexity created by the housing cost feedback loop.
For borrowers, the August 2024 decision was another month of predictability in a period that had seen significant volatility. Repayments on variable rate loans would remain unchanged if the hold scenario played out as expected.
Impact on home loans
A hold at 4.35% means variable rate borrowers keep paying at their current level. For most households, that is already a significant step up from where rates were in 2021. A couple with a $700,000 loan was paying roughly $900 more per month in mid-2024 than they would have in early 2022, before the rate cycle began.
The longer rates stay elevated, the more important it becomes to make sure you are on the most competitive rate available. Lenders are still competing for refinancing business, and the gap between the best and worst variable rates on the market can be considerable.
Use the loan repayment calculator to check exactly what your repayments look like at the current rate, and to model what a future cut would save you each month.
For context on how the rate predictions from late 2023 played out, our article on the RBA cash rate prediction for October 2023 explains where sentiment was at that point in the cycle.
What to watch next
The next key data release after the August meeting was the September quarter CPI, due in late October 2024. A quarterly inflation rate of around 0.8-0.9% would likely support continued holding. Any figure above that range could push the case for a further rise.
Labour market data was also closely watched. Strong employment and wage growth can sustain consumer spending and keep inflation higher for longer, which influences the RBA’s thinking about the appropriate setting for the cash rate.
For prospective buyers, the environment in mid-2024 required careful planning. Borrowing capacity had been squeezed significantly compared to 2021 and 2022 levels. Understanding exactly where your borrowing power sits, and what you can do to improve it, is the most productive use of a hold period.
If you are trying to understand how much your borrowing capacity has shifted over recent years, read our guide on how RBA rate movements affect your borrowing power.
Common questions
Q: When did the RBA announce its August 2024 decision?
The RBA board met on 6 August 2024. Under the pre-2024 schedule, the RBA met eleven times per year. From 2024, it shifted to eight meetings annually, making each decision somewhat more significant in terms of the gap until the next review point.
Q: Does a hold mean rate cuts are getting closer?
Not automatically. A hold simply means the RBA decided not to move the rate this month. Cuts require inflation to be consistently within the 2-3% target band and sustained enough that the board is confident it will stay there. At 3.8% annual CPI, the RBA still had some distance to travel before meeting that bar.
Q: Should I fix my rate while waiting for cuts?
That depends on your circumstances and the fixed rates being offered. If fixed rates are lower than or close to your current variable rate, locking in could make sense. If variable rates look set to fall, fixing could mean missing the benefit of future cuts. A mortgage broker can model both scenarios against your specific loan to help you decide.