The Reserve Bank of Australia’s (RBA) board is convening for a two-day meeting, where an interest rate cut is widely expected. Economists predict that an announcement will be made tomorrow at 2:30pm (AEST) regarding a 25-basis-point reduction, which would lower the official cash rate to 3.60 per cent. Should banks fully pass on this cut, homeowners with a $500,000 mortgage could save approximately $2,884 annually compared to earlier in the year before any cuts were initiated.
Last month, the anticipated reduction did not occur, and the cash rate remained at 3.85 per cent, surprising many mortgage holders. This time around, experts believe the RBA has ample reason to implement a cut, especially after the latest quarterly data reported that inflation has fallen within the target range of 2 to 3 per cent. Notably, headline inflation has dropped to 2.1 per cent, marking the lowest rate seen in four years.
Additionally, a softening job market has contributed to expectations of a decrease in the cash rate. Recent data indicated that the unemployment rate rose to 4.3 per cent, the highest level since 2022. There is also speculation in the market about a significant possibility—around 50 per cent—of an even larger cut of 50 basis points, which would further reduce the cash rate to 3.35 per cent.
As the RBA meets, mortgage holders and economists alike are keenly watching for further developments on interest rates, hoping for relief amid changing economic conditions.