December 24th 2024.
The Reserve Bank has been constantly downplaying the possibility of a rate cut, but their latest meeting minutes reveal a potential change in this outlook. Despite keeping the cash rate at 4.35% since November 2023, experts were predicting a rate cut in May of next year or even later.
However, the minutes from the December 9-10 meeting suggest that the labor market may not be as tight as previously thought. Despite the unemployment rate dropping to 3.9% in November, which was unexpected, the board noted that wage growth has slowed more than anticipated, indicating a lesser demand for workers.
In their statement, the board acknowledged that some indicators of labor market conditions have improved over the past few months, but employment growth in the private sector remains weak and hiring intentions are below average. This raises questions about the sustainability of the current interest rates, which have been largely driven by the low unemployment rate.
The board also mentioned that their confidence in inflation decreasing according to their timeline has increased, but it is still too early to make a definitive statement. This sentiment was echoed by RBA Governor Michele Bullock in her post-meeting statement, where she stated that their forecasts show a gradual decline in inflation over the next year, giving them more confidence in the future.
It is too soon to determine if this means an increased possibility of an early rate cut in 2025, but it does suggest that the RBA may feel more justified in making such a move, especially if wage data continues to trend in the same direction. In the meantime, stay updated on all the latest news, sports, politics, and weather by downloading the 9NEWS app, available on the Apple App Store and Google Play.
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