The Reserve Bank of Australia is widely expected to slash the official cash rate by 0.25 percentage points to 3.6% on Tuesday afternoon, delivering long-awaited relief to mortgage holders after last month’s surprise “on hold” decision.
Financial markets are pricing in a 99% chance of a cut, with homeowners on a $600,000 loan likely to save about $100 a month if lenders pass on the reduction in full. The move would mark the third rate cut this year, coming amid clear signs inflation is cooling faster than expected.
Benign quarterly inflation figures from the Australian Bureau of Statistics – showing headline inflation at 2.1% and underlying inflation at 2.7% – have bolstered expectations of a unanimous RBA board decision, according to Deutsche Bank chief economist Phil O’Donaghoe.
AMP deputy chief economist Diana Mousina said the cut “should have happened already”, noting that
“while the RBA will still sound cautious, there is no need for aggressive cuts yet, given the risk of inflation flaring again”.
RBA governor Michele Bullock is expected to temper market speculation of further rapid cuts, with traders currently betting on at least two more reductions after today. Canstar’s data insights director, Sally Tindall, said a full pass-through by banks would see more than 30 lenders offering variable rates under 5.25%.
The global interest rate landscape could also sway the RBA’s tone. Analysts warn of the “Trumpification” of the US Federal Reserve after the appointment of Trump ally Stephen Miran to the board – a shift JP Morgan’s Bruce Kasman says could increase pressure for deeper US rate cuts and raise concerns about Fed independence.
While household spending is 22% higher than three years ago, Australians are buying 5% less in real, per capita terms, underscoring persistent cost-of-living pressures. Challenger chief economist Jonathan Kearns said, “No wonder the government is thinking about how to boost economic growth with its productivity summit in a couple of weeks.”
The RBA board will announce its decision at 2:30 pm AEST.
Support our Journalism
No-nonsense journalism. No paywalls. Whether you’re in Australia, the UK, Canada, the USA, or India, you can support The Australia Today by taking a paid subscription via Patreon or donating via PayPal — and help keep honest, fearless journalism alive.
