Will The RBA Cut The Cash Rate Tomorrow?

Tomorrow’s RBA meeting is one of the most anticipated in recent months, with speculation mounting over whether the central bank will reduce the cash rate. According to Home Loan Experts’ Senior Mortgage Broker Jonathan Preston, while a rate cut is highly probable, he believes the RBA will only cut once, if at all, in the coming months.

RBA Rate Cut Predictions: A One-Time Move?

“The ASX’s RBA rate tracker still has the probability of a rate cut at 90%,” says Preston. “My current feeling is they will either do a cut or hold this meeting, but they will only cut once. I don’t think the economy is bad enough to justify multiple cuts.”

Preston points out that multiple cuts could lead to further depreciation of the Australian dollar, making imports more expensive and exacerbating inflationary pressures. “A weakening Aussie dollar makes all overseas products more expensive,” he explains. This concern over imported inflation may act as a limiting factor for the RBA when considering deeper or more frequent rate cuts.

Why A Rate Cut May Happen

One of the strongest arguments for a cut is the decline in household real per capita income. “While we don’t have a collapsing economy, we do have significant weakening in household real per capita incomes – essentially, living standards have been going backwards rapidly,” says Preston. This economic strain on households could push the RBA toward easing monetary policy to provide some relief.

Additionally, key housing indicators are showing signs of slowing. “The 12-month change in rents is moving pretty slowly now, and housing prices are falling,” Preston notes. “All of that supports potential rate cuts, as rental inflation was a big sticking point before.”

The Road Ahead

Despite the economic pressures, Preston remains skeptical about multiple rate cuts. “I still think it is going to be hard for them to cut more than once unless we see new labour market weakness or some other form of economic deterioration,” he states. However, he remains open to being proven wrong.

What This Means for Borrowers

If the RBA does cut the cash rate tomorrow, home loan borrowers could see some relief, especially those on variable-rate mortgages. However, if the RBA holds steady, mortgage holders may have to wait a little longer for a potential rate cut in the coming months.

Regardless of the outcome, staying informed about rate movements and working with a mortgage expert can help borrowers make smart financial decisions in a changing interest rate environment.