Hotter-than-expected monthly CPI figures in May sent jitters through the market, pulling shares down and increasing bets that Australia's benchmark rate will rise by 25 basis points at the next meeting in August.
On 18 June, the day the RBA Board wrapped up their fourth meeting in 2024, only 5% of ASX traders expected a rate hike in August.
When the ABS released its latest inflation indicator on June 26, that number went up to 37%, then to 45% the following day.
The headline inflation rate rose 4% last month off the back of mostly volatile items like heady housing and food prices, as well as increased transport and holiday travel costs.
Excluding those items, core inflation remains elevated at 4%, and the trimmed mean (RBA's preferred gauge) at 4.4%.
Despite revising its near-term inflation forecast from 3.3% to 3.8% for June, it appears the RBA's 'narrow path' is looking narrower still.
According to NAB, the May CPI indicator "signals upside risk" for a Q2 trimmed mean print of 0.9% quarter on quarter, bringing the annual rate to 3.9%.
Following these hot CPI figures and bleak inflation outlook, NAB economists have delayed their rate cut call from November 2024 to May 2025.
"Progress on inflation has been slower than we and the RBA expected," admitted NAB chief economist Alan Oster, while recognising the very likely scenario that the Reserve Bank may raise rates in August.
However, "with the labour market easing, we don't believe their hand will be forced".
Instead, Mr Oster and his economic team expect the Board to remain on hold, with inflation likely to slow in the second half of 2024 alongside further easing in the labour market.
As it stands, mortgage holders will have to wait a bit longer before relief arrives.
And that relief is contingent upon the official quarterly index due on 31 July.
Should inflation accelerate, it pays to remember that the RBA has made it clear in its previous post-meeting statement that "it will do what is necessary" to return inflation to target.
RBA data indicates TD rates are on the move again; in May 2024 the average 12-month rate was 4.55% p.a. after staying at 4.45% p.a. from February through April.
As the cash rate stays higher for longer, term depositors can take advantage of boosted returns.
Some will win, some will lose, indeed.
Bank of Queensland hikes term deposit rates
Australia's sixth-largest bank (in total assets) is throwing its hat in the 5% ring, hiking rates on its short-term deposits by as much as 15 basis points.
Bank of Queensland's best rate is available through its 6-month Premier Investment Term Deposit, offering 5.10% p.a. returns at the end of the term.
That works out to $127.50 in total interest payable on a $5,000 deposit (the minimum amount; the max is $250k), before tax is taken into account.
Customers who prefer to receive their 6-month TD earnings monthly would have to settle for a slightly lower rate of 5.00% p.a. - which is still competitive considering you'll realise a total of $126.31 earnings on a $5,000 deposit by December.
Following this week's adjustments, BOQ's 9-month term deposit now pays 5.05% p.a. returns at maturity and 4.95% p.a. monthly.
The minimum deposit to access these rates is also $5,000, and the maximum is $250,000.
ME Bank also moves rates up
Bank of Queensland's digital banking unit ME applied a 25 basis point boost on its 6-month term deposits, raising the rates to 5.10% p.a. paid at maturity and 5.05% paid monthly.
The minimum deposit to secure these rates is $5,000, while the maximum is $2 million (higher than BOQ's max deposit).
Depositors looking for other products paying 5.00% p.a. returns on slightly shorter or longer terms than six months may turn their heads to ME's 4- or 9-month term deposits, whose rates are as follows:
|
Term length |
New rate (change) |
Deposit size |
Payment frequency |
|
4 months |
5.00% p.a. (+5 bps) |
$5,000 - $2,000,000 |
End of term |
|
9 months |
5.05% p.a. (+15 bps) |
$5,000 - $2,000,000 |
End of term |
AMP Bank offers more term deposits at 5% p.a.
AMP Bank has brought more of its term deposit products past the 5% mark.
The bank applied a 40 basis point boost to its 5-month term deposits, bringing the rate up to 5.15% p.a.
Up 45 basis points, the bank's 10-month term deposits now pay a maximum of 5.20% p.a. interest.
AMP Bank's top rate of 5.05% p.a. was previously offered through its 6-, 9-, and 12-month TDs.
|
Term length |
New rate (change) |
Deposit size |
|
5 months |
5.10% p.a. (+40 bps) |
$5,000 - $24,999.99 |
|
5 months |
5.15% p.a. (+40 bps) |
$25,000 - $10 million |
|
10 months |
5.15% p.a. (+45 bps) |
$5,000 - $24,999.99 |
|
10 months |
5.20% p.a. (+45 bps) |
$25,000 - $10 million |
Judo Bank slashes rates on long-term TDs
Judo Bank has cut the rates on its long-term deposit products by as much as 20 basis points in the face of its chief economic adviser's near-term outlook of cash rate hikes.
Following the release of the monthly CPI on Wednesday, Warren Hogan warned that "the 4.35% cash rate won't get the job done on inflation".
Mr Hogan is betting on at least three rate hikes this year (the RBA Board will meet four more times in 2024), likely starting with a 40 basis point increase in August.
Despite the cuts, Judo Bank's 2-, 4-, and 5-year term deposit products still offer competitive returns at 5.00% p.a. payable at maturity and 4.95% p.a. annually.
This means a minimum deposit of $1,000 today will yield $250 at 5.00% p.a. by 2029, or $500,000 if you invest the maximum deposit size of $2 million.
Bank of Sydney changes tack, varies term deposit rates
Bank of Sydney moves further away from the market-leading status in the 6-, 9, and 12-month term deposit spaces after another round of rate cuts this week.
The recent adjustments seem to reflect a shift in the bank's strategy, steering away from tight competition and focusing on a relatively niche market.
Bank of Sydney was previously tied with Great Southern Bank and G&C Mutual in offering the second-best rate on 6-month term deposits.
It was also neck and neck with Gateway Bank for the fourth-best rate on one-year terms.
Not anymore.
The bank now settles on the ninth-best rate on 6-month terms and the fifth-best rate on one-year TDs.
However, Bank of Sydney is making a play for the 7-month term deposit market after increasing its rates by 60 basis points.
At 5.10% p.a., Bank of Sydney's rate is the third-best in the 7-month TD market, with the top rate currently held by MOVE Bank at 5.25% p.a.
|
Term length |
New rate (change) |
Deposit size |
Payment frequency |
|
3 months |
4.75% p.a. (-10 bps) |
$1,000 - $1,000,000 |
End of term |
|
6 months |
4.80% p.a. (-40 bps) |
$1,000 - $1,000,000 |
End of term |
|
7 months |
5.10% p.a. (+60 bps) |
$1,000 - $1,000,000 |
End of term |
|
9 months |
5.00% p.a (-10 bps) |
$1,000 - $1,000,000 |
End of term |
|
12 months |
5.00% p.a (-10 bps) |
$1,000 - $1,000,000 |
End of term |
Other movers
- BankVic increases 6-month term deposit rate by 20 basis points
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