The Reserve Bank of Australia (RBA) is set to announce its latest interest rate decision today, and expectations for a rate cut appear bleak for borrowers. Current market predictions indicate only an 8% likelihood of a reduction in the cash rate during the announcement at 2:30 PM, largely influenced by recently released strong inflation data.
Economists widely agree that the RBA is likely to keep the cash rate steady at 3.6%, with any reductions not anticipated until at least November. An increase in inflation, as reported by the Australian Bureau of Statistics earlier this month, has dampened hopes of immediate rate cuts. Specifically, the annual trimmed mean inflation, which is the RBA’s preferred gauge of underlying inflation, was recorded at 2.6% for August, signalling a challenging economic environment.
A panel of 32 financial experts unanimously concluded that the RBA has little flexibility for a rate cut at this time. The current economic landscape provides a mixed picture with robust consumer spending alongside rising inflation and increasing unemployment rates. According to experts from Finder, there is a cautious approach from the RBA, promoting a gradual reduction strategy rather than immediate cuts.
Tomasz Wozniak, an economist from the University of Melbourne, noted that while the RBA is on a downward path regarding the cash rate, the anticipated rate cuts would be staggered over time rather than occurring at each meeting. Therefore, mortgage holders may need to wait until the next RBA board meeting on November 4—coinciding with Melbourne Cup Day—for any adjustments to the cash rate.
Sebastien Mullins, head of multi-asset and fixed income at Schroders, remarked that financial markets are estimating a 50% chance of a rate cut during the November meeting. He indicated that by that time, the RBA would have clearer insights from the October inflation numbers as well as the official data for September.
In summary, those looking for immediate relief in mortgage repayments are likely to be disappointed, as the RBA’s cautious stance appears set to remain in place for the foreseeable future.