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CPI figures show inflation is nearing the RBA's comfort zone. What will a rate cut mean for you?

New inflation figures from the Australian Bureau of Statistics are a promising sign that a rate cut will happen sooner rather than later.

Annual inflation is 2.4%, which is within the inflation target set by the Reserve Bank of Australia (RBA).

The more important trimmed mean inflation number is 3.2% for the year, which is down from 3.6% last quarter and well down from its 2022 peak of 6.8%.

Will the RBA cut rates in February?

Trimmed mean inflation is a more accurate measure of the cost of living and one the RBA watches like a hawk.

It's just above the RBA's comfort zone, a target band of 2-3%. But it's very close.

There will be pressure on the RBA to cut rates soon, if not at its next meeting on 17 February.

A February rate cut is "still on the table" says RSM Australia Economist Devika Shivadekar. But the likelihood is "evenly split but skewing slightly towards a hold."

A lower cash rate means lenders will cut variable home loan interest rates for borrowers.

But that's still a couple of weeks away. And there are other factors at play, like the falling Aussie dollar, which makes imports more expensive and pushes inflation up.

That could make the RBA hold the cash rate for a little bit longer.

How much would a rate cut save you?

Whatever happens, a rate cut is closer. And that's a huge relief.

The average new Australian home loan is now $641,416. With a 30-year home loan at the average home loan rate of 6.3% that's a $3,971 monthly repayment.

Even just a 25 basis point rate cut would drop that repayment to $3,867. An instant $104 monthly saving.

A 50 basis point cut would save the average borrower $207 a month.

Fingers crossed.

Finder's expert panel will have their RBA cash rate predictions out in early February. But don't wait for a rate cut, there's never a bad time to get a cheaper home loan rate.

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