News Corp Australia reported on October 11 that Australian homeowners are unlikely to get the Christmas gift they hope for from the RBA, as interest rates are likely to remain unchanged.
However, some economists predict that when interest rates are cut in February next year, the magnitude may be even larger than expected.
According to consumer price index data released by the United States Department of Labor on October 10, inflation in the country fell to a three-year low of 2.4% in September, although the figure was higher than economists' forecast of 2.3%.
While inflation in the United States has sparked talk of interest rate cuts in Australia, independent economist Saul Eslake told News Australia that the RBA is unlikely to follow in the Fed's footsteps in cutting rates.
"The central bank will make decisions based on what it thinks will happen in Australia, rather than following the Fed's example. For decades, the RBA hasn't really followed the Fed's lead. ”
(Image source: News Corp Australia)
For now, stressed mortgage holders hope Australia will follow United States' lead in lowering interest rates. However, Eslake predicts that the RBA may wait until after the release of economic data in December.
"I think the first rate cut will come in February, and maybe 50 basis points at a time."
"One of the reasons is that the Fed has already taken similar measures, and part of the reason is that Australia's first four rate hikes were all 50 basis points."
"It's a powerful way to show that the focus is shifting. Once confident that inflation is back within the target range, the RBA can declare to the economy, businesses and households that the battle against inflation has been won, and the focus will now shift to preventing any unnecessary rise in unemployment or weaker economic activity. ”
(Image source: News Corp Australia)
While this is a bigger cut than the market expects, Eslake said it could just be a matter of timing.
"The market is expecting a 25bp cut in December and 25bp each in February, and I think they're going to do it all at once."
Although the RBA is unlikely to cut the cash rate at its November meeting, there is a glimmer of hope for Australian consumers.
(Image source: News Corp Australia)
If the Fed continues to kick rates from September, and the RBA leaves rates unchanged, the Aussie could strengthen.
"This will help lower the cost of living, it will make imports cheaper, and it will have less impact on exporters," Eslake said. ”
"Although the impact is not significant, the RBA will think it helps. This is part of the tightening of financial conditions. ”
"The RBA believes that if they do things differently from the Fed in terms of interest rates, it could lead to a higher Australian dollar."