RBA interest rate cut expectations remain cautious ahead of meeting

RBA cuts interest rates to 4.1% but banks predict no further cuts in April despite easing inflation pressures.

The Reserve Bank of Australia (RBA) cut interest rates to 4.1 per cent for the first time since November 2020 in February. However, mortgage holders should not expect consecutive cuts when the board announces its decision today.

Australia’s inflation rate fell to 2.4 per cent in February, with underlying inflation at 2.7 per cent. Economist Stephen Koukoulas highlighted strong reasons for another interest rate cut based on these inflation figures.

Despite this, economic teams from Australia’s Big Four banks predict that rates will remain unchanged. Gareth Aird from CBA pointed out that data has been softer than RBA’s expectations, but not enough to compel a rate cut. Aird noted that further cuts would indicate a significant shift in RBA’s economic outlook in a short time frame.

The banks predict the next quarterly inflation data due on April 30 will be below RBA forecasts, potentially paving the way for a 0.25 per cent cut in May. The unemployment rate is stable at 4.1 per cent, also not prompting an immediate rate change in April.

CBA, Westpac, NAB, and ANZ all expect the cash rate to be held steady at 4.1 per cent today. Looking ahead, CBA and Westpac foresee three total cuts this year, while ANZ anticipates only one.

A mortgage of $600,000 could see monthly repayments reduce by $91 with a 0.25 per cent cut. Experts surveyed largely believe the RBA will maintain the current rate in April. Their next meeting is scheduled for 2:30 pm AEDT today. Further meetings will occur periodically until November.