Will the RBA cut rates on Melbourne Cup day?

Friday 14 October 2016

Article by Kelly Emmerton

The RBA has cut interest rates twice this year, but now the question on everyone’s lips is whether the record low 1.5% cash rate is here to stay in November, or if it will be pushed even lower.

Will the RBA cut rates on Melbourne Cup day?

Last month, in Governor Philip Lowe’s first cash rate announcement, the Reserve Bank held rates steady yet again - which experts had all but unanimously predicted.

But experts have been predicting a rate cut late in the year for some time now, with some anticipating a drop down to a flat 1% by 2017.

Earlier this month, bets were still on a November rate cut. Pressure to bring a strong Aussie dollar back down was cited as one of the reasons the board might consider a rate cut again this year, but inflation is the real sticking point for most analysts.

RELATED: Good news homeowners! 1% RBA cash rate just around the corner

Experts were predicting that new inflation numbers made available in late October would prompt the board to adjust rates, in order to hit the 2-3% inflation target.

In his statement at last month’s interest rate announcement, Lowe mentioned that inflation figures were low, and that this was unlikely to change any time soon - but didn’t seem overly concerned.

"Inflation remains quite low. Given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this is expected to remain the case for some time,” he said.

Now, however, some experts say interest rates might be kept on hold until 2017 as consumer prices rise to be back within the RBA’s inflation target.

The decision might largely come down to the September quarter inflation figures, which will be released on October 26, a week before the Reserve Bank makes its November rate announcement.

Keep an eye on our Reserve Bank page to find out what happens and what it will mean for your finances.

Back to top