Economists and financial institutions across the world have been watching the Reserve Bank of Australia (RBA) closely. The market doesn’t just expect cash rate cuts in the near future. All four of Australia’s major banks—ANZ, Commonwealth, NAB, and Westpac—see the cash rate going down. They forecast it will be just over 3.35 percent in August. Just in May, the cash rate was slashed from almost four percent. That’s why it’s at its current historic low of 3.85 percent.
The RBA usually holds eight scheduled meetings a year — roughly once a month. Save the date and stay tuned for more details! We have additional meeting dates scheduled for July 7-8, August 11-12, September 29-30, November 3-4 and December 8-9. Outcome from these laborious meetings typically gets made public on Tuesday afternoons. This renders the next meeting extremely critical for economic watchers.
Predictions from Major Banks
Both ANZ and Commonwealth Bank now expect the cash rate to hit 3.35 per cent by August. NAB has forecast a fall this quarter. They too went on to forecast an even steeper decline to 3.1 percent by December. Westpac is on the same page, with rates predicted to hover around 3.35 per cent by the end of 2024.
These expected declines are in large part due to a nationwide trend of loosening monetary policy that’s designed to help boost economic recoveries. Economists seem universally agreed that the RBA will move in favour of a 0.25 per cent cut in the near future.
“The cash rate is the interest rate that banks pay to borrow funds from other banks in the money market overnight,” – Reserve Bank of Australia’s website
Impact on Australians
The impacts of the RBA’s decisions resonate deeply across Australia, especially for those with mortgages and those who are saving. As noted on the RBA’s website, “It influences all other interest rates, including mortgage and deposit rates.” A decrease in the cash rate directly lowers interest costs for both consumers and companies, which can encourage economic activity and drive recovery.
Yet the cash rate has ostensibly already fallen from its prior peak of above four percent. More cuts would come as a huge relief to families facing an increasing cost of living. The impact of these adjustments will be monitored closely as the RBA continues its efforts to balance economic growth with inflation control.
Future Outlook
As Australia faces economic uncertainties stemming from various global factors, the RBA’s monetary policy will play a crucial role in shaping the economic landscape. The meetings in July and August will be particularly important to decide what will happen with interest rates. They will really answer some of the challenges that we’re up against.
