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Interest Rates Recap February 2024

It’s not only Australians holding their breath waiting for news about an interest rate cut. Interest rates in 2024 have been the subject of debate from the average person on the street to businesses to global leaders. So, how do things stand right now? Find out with this interest rates recap for February 2024.

Key Points

Market Overview

Global inflation remains high. So much so, that the World Economic Forum made it a top priority on the agenda at their January summit in Davos, Switzerland. But in Australia, for now, the cash rate is unchanged. The RBA announced at their February meeting that the cash rate will remain at 4.35%

The RBA has, however, reduced its GDP and CPI forecasts for this year. And although the tightening bias has not been completely removed, it has also been downgraded. Now Australians wait with bated breath for an interest rate cut.

Relevant News

The RBA has stated that goods price inflation has declined, while services price inflation remains high. The RBA expects inflation to return to the target range of 2–3% in 2025, and reach a midpoint in 2026. 

Weary of the 13 interest rate rises suffered since May 2022, Australians are hopeful this will change later in 2024. This was met with economists like Shane Oliver saying that the RBA appeared to be “in no rush”.

Inflation is rampant across the world. It was a topic of discussion at the WEF meeting from 15–19 January in Davos. Their High Rate Reality session was dedicated to a discussion about the impact of high inflation and interest rates on the world’s economy. 

The WEF’s January 2024 Chief Economists Outlook indicates weak economic growth worldwide, but an eventual easing of inflationary pressures.

Conclusion

Inflation remains high worldwide, not only in Australia. The usual response to high inflation is an interest rate hike. Unfortunately, that produces its own set of woes, such as slowing down economic growth, and creating debt sustainability risks.

Australians continue to buckle under the pressure of more than a dozen interest rate hikes since May 2022, affecting everything from everyday banking to mortgages. The RBA appears to be in no rush to reduce the interest rate, while it waits for signs of slowing inflation. However, the Reserve Bank has admitted that inflation should enter the target band by next year. 

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