October 2023 Interest rate update

By Forrest Private Wealth

Earlier this month, the RBA opted to maintain the official cash rate at 4.1% for the fourth consecutive month. This board meeting held significance due to it being Michele Bullock’s first meeting as the RBA governor. She officially assumed the role of governor on September 18th, succeeding Philip Lowe, who had held the position for seven years.

In her official statement regarding the decision, Michele Bullock indicated that recent data aligned with expectations of gradual inflation return to the 2–3% target range over the forecasted period. Additionally, the RBA continued to observe growth in both output and employment. Despite moderating inflation and somewhat slowed economic growth, the labour market remained strong, and the economy operated at a high level of capacity utilization.

However, Bullock also acknowledged significant uncertainties in the economic outlook. She pointed out that service price inflation had been persistently high in other countries, which might present similar challenges in Australia. Uncertainties existed regarding the time lag in the impact of monetary policy measures and how businesses make pricing decisions and adjust wages, especially in response to slower economic growth in a tight labour market.

Furthermore, the outlook for household consumption remained uncertain. Some households faced financial pressures, while others benefitted from rising housing prices, significant savings, and increased interest income. Bullock suggested that there might be a need for further tightening of monetary policy to ensure that inflation returns to the target range within a reasonable timeframe. However, such decisions would continue to depend on evolving data and risk assessment.

When observing the escalating crisis in the Middle East, it’s impossible to ignore its dual impact. Firstly, there’s the profound humanitarian crisis that demands immediate attention. Secondly, there’s the economic perspective, which raises concerns about the potential long-term effects on oil prices.

In the past, the RBA has indicated its vigilance regarding the rise in petrol prices. This could be an indicator of a potential interest rate increase, perhaps even coinciding with Melbourne Cup Day. One might wonder about the likelihood of such an occurrence. For those interested in the odds, Sportsbet may have some insights to offer!

What are interest rates?

An interest rate is the amount charged by a lender to a borrower as a percentage of the principal, or the amount loaned. Typically charged by banks (lenders) to home owners (borrowers), interest rate margins are generally how lenders derive a profit.

What is the Reserve Banks role in interest rates?

The Reserve Bank is responsible for monetary policy in Australia. This includes setting the interest rate in the money market which is referred to as the cash rate. The Reserve Bank supports the supply of credit to the economy as part of its policy work. The intention of the Reserve Bank’s policy setting is to affect the behaviour of borrowers and lenders, economic activity and ultimately the rate of inflation.

What is Australia’s inflation target?

In determining monetary policy, the Reserve Bank impacts the stability of the Australian currency, employment, and the general wealth and welfare of Australians. To achieve this, the Reserve Bank has an ‘inflation target’ and seeks to keep consumer price inflation in the range of 2–3 per cent. Controlling inflation preserves the wealth of the country and encourages sustainable long term growth in the economy.

At the time of writing this blog the last inflation read, CPI, was 6% in the June quarter.

Forrest Private Wealth

Forrest Private Wealth is an independently owned Perth financial planning boutique specialising in financial planning, retirement planning and wealth management. It’s easy to book a free 15 minute virtual coffee with one of our team of financial planners to discuss your individual circumstances. We can then either put you on the right path or work with you to set a financial plan and assist in managing aspects of your financial life. Ultimately, we want to ensure you have the retirement you want and to make your life better through sound financial guidance.


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