Outside bet: some experts still predict RBA rate cut on Melbourne Cup Day

The November Reserve Bank announcement is almost upon us, and although most experts are now predicting that rates will stay on hold at a historically low 1.5%, some still think there’s the chance of a cut.

In September and into the beginning of October, many analysts were betting on a November rate change, expecting the inflation data released last week to prompt yet another cut.

But now experts are swiftly backing away from these earlier predictions, after stronger than expected headline inflation numbers. Although inflation remains well below the RBA’s desired 2-3%, it did show an annual rise of 1.3% — enough that financial markets have all but ruled out the chance of another rate cut.

But not all economists were convinced, and some are still holding out for a rate cut tomorrow. The chief economist at CBA, Michael Blythe, that the decision may well come down to whether the Reserve Bank prioritises low inflation over housing market prices and debt stability.

"The Reserve Bank is definitely looking for reasons not to cut and they've got plenty of things they could point to, but it would require them to back down on that housing view, which they're clearly reluctant to do," Blythe said.

"Most of what the bank says is along the lines of, the housing market is cooling. Which indicates they probably think it will be quarantined from another rate cut, if that's what happens."

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The experts at HSBC, who predicted rates would hold some time ago, said the 1.5% rate would remain steady largely due to a recent lift in commodity and oil prices.

The lift in commodities, which have risen 26% this year, and oil, which is at its highest level in more than a year, should bolster the Aussie economy and ultimately boost inflation, the HSBC experts argued.

"Although this still means that year-on-year inflation is likely to be below the 2-3% target band for the next couple of quarterly prints, as long as the RBA believes it will head back to the target band over time we expect that they will not feel the need to cut further," they said.

This may not be particularly good news for regular Aussies - rising oil prices would also push up petrol prices, along with the cost of transport and energy.

To find out what the RBA’s Melbourne Cup call was and what it will mean for your home loan and savings, remember to check our Reserve Bank page before you settle in for some racing action.


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