Inflation Is Easing — So Why Aren’t Interest Rates Coming Down?
You might’ve seen headlines recently saying inflation is finally starting to cool.
And technically, that’s true.
But if you’re a homeowner wondering whether this means interest rates are about to drop… The short answer is: no.
What Actually Happened with Inflation?
The latest figures from the Australian Bureau of Statistics show inflation has eased a little:
- Prices are still rising, just not as fast as they were
- Overall inflation dropped to 3.4%
- “Underlying” inflation (the number the RBA cares most about) is sitting around 3.2%
That’s a step in the right direction. But it’s not a big enough step to change the Reserve Bank’s thinking just yet.
Why This Doesn’t Mean Rate Cuts Are Around the Corner
A big reason inflation came down in November was due to things like:
- Electricity prices
- Domestic travel
- Car prices
These are the types of costs that can jump up or down from month to month. They don’t always reflect what’s happening across the whole economy.
From the RBA’s point of view, the bigger concern is whetherday-to-day living costsare still creeping up, things like rent, services, and wages. And those pressures haven’t fully eased yet.
That’s why most banks are saying the same thing, this data is encouraging, but it’s not enough to justify rate cuts.
What the Big Banks Are Saying
There’s no single view, but here’s the general picture:
- A couple of banks think there could be one more rate rise
- Others think rates will stay exactly where they are
- No major bank is confidently calling rate cuts in the near future
In other words, the RBA is walking a tightrope. Inflation is improving, but it’s still higher than they’d like, and they don’t want to ease too early.
The Next Important Date to Watch
The next key piece of information comes at the end of January, when we get the December quarter inflation data.
The RBA has already said this quarterly data matters more to them than the monthly numbers, so it will play a big role in their next decision in early February.
Until then, it’s largely a waiting game.
What This Means for Homeowners
If you have a mortgage, here’s the practical takeaway:
- Rates are stable – which is good
- But relief isn’t immediate either
- The RBA is still being cautious and guided by the data
Most economists are still on the fence currently, and no one can truly predict where the rates are going to move. This is why it’s risky to base decisions on headlines or predictions alone. Whether refinancing, fixing, or restructuring your loan makes sense depends far more on your cash flow, your loan structure, and your long-term plans than on guessing the next RBA move.
Inflation is moving in the right direction. Now it just needs time to stay there.
