These graphs show movements in the official cash rate over time and changes to the market's lowest home loan rates over the same period. You can see how the market responds by raising or lowering rates broadly in line with the RBA's decisions.
How often are Finder's expert predictions correct?
The latest cash rate analysis from the experts
Finder regularly surveys 40+ economists and property experts to forecast the RBA's next cash rate decision and get insights into the future of the Australian economy. Here are the most recent cash rate predictions.
I think the RBA should leave the interest rate on hold in February. Inflation has only just returned to the target range, so it’s probably too early to cut rates. Plus, the job market is still strong, which shows the economy is holding up well.
Cherish the day! My forecasting system indicates that it's a decisive CUT. The predictive intervals from the pooled forecast, including from all bond yield curve models, for the first time in years, do not include the current value of the cash rate. This seems in line with what the newest data releases, including inflation readings, suggest. You can access these forecasts at https://forecasting-cash-rate.github.io/
The latest Monthly CPI Indicator from the Australian Bureau of Statistics revealed the lowest recorded rise in inflation since the June 2020 quarter, which I believe will give the RBA Board confidence to deliver the first cut to the cash rate since November 2020.
Underlying inflation is falling faster than the RBA expected and has been running around target over the last six months, economic activity is a bit weaker than expected and Trump’s trade war poses more risks to Australian growth than inflation.
Core inflation remains elevated. With the RBA’s focus on price stability and its credibility at stake, they are likely to hold the cash rate until the next board meeting.
Although there's some ambiguity about the RBA's reaction function, there's an implicit bias to lower rates progressively as inflation trends towards the mid-point of the target band. Given the RBA hasn't come out to push back on this notion and market pricing since January's inflation figures, it says to the me this is how the RBA is seeking to adjust policy going forward, beginning with a cut at this meeting.
Although the preferred measure of inflation is clearly moving towards the RBA target range risks remain. Services inflation remains too high, the labour market remains strong with upward pressure on wages due to worker shortages and the US has indicated a steady outlook for rates following recent falls as inflation rises again. The likely widespread imposition of tariffs by the US and retaliation by trading partners risks higher inflation. Surely given these circumstances it is prudent for the RBA to continue in pause mode at least over the shorter-term
I think it will be a tight call for the RBA at its next meeting. Financial markets expect interest rates to be cut. But at the same time, I think the RBA will want to see more evidence of a sustained fall slowdown in inflation before it commits to a rate cut.
I think the RBA will hold the cash rate constant until core inflation is expected to be sustainably in the target band given the ongoing strength of the labour market.
We'll find out soon enough if the RBA wants to return to the regime it ran in the decade before COVID in which it targetted lower employment than we've subsequently discovered was almost certainly possible. The strange events at the beginning of this decade raised the prospect we might get back near full employment. But the RBA may decide that the 'natural rate' of unemployment is higher than the rate we can achieve and stick to that. It should definitely cut.
The efforts to curb inflation appear to have worked and while the employment market remains strong, the cost of living – especially the cost of housing – means many Australians will welcome relief in the form of a rate cut.
CPI has been falling for the past two years and now seems to be stabalising in the target range. The challenge is that prices for goods and services are not falling, they are just not rising as fast as they were. Also unemployment is still fairly low. That said, I think one or two rates cuts in 2025 is warranted in order ease the pain with regards to the cost of living.
The February decision will be very close run. Inflation in Q4 was a little weaker than the RBA expected. But there are still questions about where underlying inflation will be once the impact of subsidies wash out. Services inflation is still looking very strong - a byproduct of the labour market still operating beyond its capacity. The RBA may opt to wait and see how the labour market plays out over the next few months before cutting rates.
We are herd animals. The Bank board is no exception, as it demonstrated during Covid. Yet there is a respectable case for the Bank to resist the pervasive social pressure to cut. The latest data confirm that the labour market is strong, and trimmed-mean inflation is still outside the target range.
Inflation has been within the RBA’s 2-3% target band for two consecutive quarters, while economic growth remains low. The sustained period of high interest rates has heavily and disproportionately affected mortgage holders. A rate cut would provide much-needed relief to households and support broader economic stability.
Headline inflation is back in (the middle of) the target range at 2.4% and the main underlying measure the RBA tracks (trimmed mean) is at 3.2% is just outside the 2-3% target range and a bit below the RBA forecast. Given a likely continued decline in underlying inflation back to the target range and the possibility the output gap and non-inflationary rate of unemployment are lower than the mid-points of RBA estimates suggest a slightly lower prescribed policy rate somewhere around 4.1%. There are risks to global inflation given the possibility of a trade war. But it makes sense to respond more now to current conditions and only adjust the policy rate to the domestic inflationary (and recessionary) impacts of such an event when they become clearer.
Inflation is sustainably anchored to the target band.. The labour market is steady. Output growth remains weak. Aggregate demand is propped up by public sector expenditure, mainly through energy subsidies. If and when these are removed, the CPI would mechanically rise but aggregate demand will likely fall well below potential output, risking a recession. The tariff wars have now begun, which shouldl affect aggregate demand later in 2025.The RBA ought to have lowered earlier in anticipation of these dynamics, but now the case for starting the interest rate cutting towards the neutral rate is overwhelming.It seems that there is now almost a full consensus to cut amongst reputable economists and from market pricing.
The populist view is that the RBA will drop interest rates this month because inflation is coming down. I don't share that view because of the following: 1) inflation has been impacted by government subsidiaries and it is unclear whether the reduction is sustainable. If its not, reducing rates will be inflationary 2) The strength of the labour market has seen low unemployment rates. You don't reduce rates in these circumstances because they will have an inflationary impact 3) The Australian dollar is weak against the US$ and its major trading partners. A weak $A means imports are more expensive and this is inflationary. Reducing interest rates may further exasperate this position. 4) There is current uncertainty in world trade and financial markets due to the US's position on tariffs. This could have negative impacts on the Australian economy and in such circumstances it would be better to wait and see what these impacts might translate into - reducing rates now would therefore not be a prudent move.
This is a tough call, and I know I’m in the minority by saying rates will stay on hold. But the reality is the Reserve Bank would rather wait another month than risk moving too soon. The problem is inflation in the building industry remains massive, labour shortages are severe, and the job market is still strong—keeping inflationary pressure on the economy. Right now, I don’t see how a rate cut can be justified, even though I have enormous sympathy for mortgage holders doing it tough. It’s a sad system when they bear the brunt of the fight against inflation.
The latest CPI data (especially core inflation) was more benign than expected, allowing the RBA to initiate the easing cycle in February. We expect at least three cuts to a more neutral cash rate of around 3 1/2 % by November.
Monthly inflation readings have fallen precipitously and the Dec quarter CPI report showed headline inflation within the RBA's target range. While underlying inflation is still slightly above the target range, the trend since Dec quarter 2022 has been consistent decline. Any temptation to further reduce the cash rate will be tempered by any upward pressure on house prices, continued full employment and any geo-political inflation shocks. The RBA will likely only move to cut rates in a sustained fashion once convinced that underlying inflation has settled in the 2-3% range.
Inflation is reportedly at its lowest level in three years and is on the cusp of the RBA's 2-3 per cent target zone. Many economists and experts earmark February as the potential start of a series of rate cuts.
Underlying inflation over the year to Q4 2024 was (in my view) close enough to the top end of the 2-3% target band to give the Board the confidence it's previously said it needs that inflation is 'sustainably' headed back to the target band (indeed according to the monthly CPI indicator it was back in the target band over the 12 months to December). And although the labour market is still tight by historical standards, the slowdown in wages growth over the first three quarters of 2024 suggests that the unemployment rate consistent with 'sustainable' full employment may be lower than the RBA's estimate of about 4.5%. Given that monetary policy works with a lag, if the RBA were to delay easing monetary policy much longer, given that the conditions it has previously stipulated for a first easing appear to have been satisfied, it would risk 'under-shooting' the inflation target (as it did between 2016 and 2020) and keeping unemployment higher than necessary (as it also did between 2016 and 2020).
The sentiment has shifted to cut for Feb with investors and major banks all signalling that a cut is likely. Inflation is still falling however labour markets are strong and the government is overspending. I feel that they should hold, even though this isn't a popular opinion in the finance broking industry, as it would be disastrous for consumer sentiment if they need to increase in future. The threat of trade wars and tariffs and a AUD regressing against major currencies is a sign of more inflation to come, the RBA cannot afford to get this wrong and I don't see another quarter of stability as a bad thing in the scheme of the current environment
Inflation is falling into the RBA's target range, and GDP remains weak. Being election year there is no doubt that there are other agendas and pressures at play, we hope the RBA does not succumb to them
The RBA is "over-achieving" on inflation to the extent it can confidently forecast it returning to target. With the private economy weak a cut would also buttress the labour market.
It would be optimal to ensure that underlying inflation continues its trajectory, and that the RBA's target is stable before reducing interest rates. With uncertainty in the global environment given US policy and how it may impact Australia both directly and indirectly, it may be prudent to remain cautious and not move prematurely.
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The Reserve Bank of Australia sets the official cash rate target. This is a benchmark rate that has a big impact on home loan interest rates, savings accounts and other credit products.
What is the official cash rate?
One of the Reserve Bank's primary roles is setting monetary policy for the Australian economy. This involves setting the cash rate (or to use its full name, the official cash rate target).
At a technical level, the cash rate is actually the interest rate banks pay for borrowing money from each other overnight. Banks use this to manage liquidity and issue funds as needed.
Australian banks can borrow and deposit money with the RBA at just below the current cash rate target.
How the official cash rate target affects interest rates
But for the average Australian consumer, the cash rate is really useful as a broad benchmark for the interest rates on home loans and savings accounts. A high cash rate makes borrowing money more expensive and sees home loan repayments rise.
A low cash rate makes it cheaper to borrow money. This boosts borrowing and spending.
How has the cash rate changed over time?
The Reserve Bank adjusts the official cash rate target over time in response to various economic data, including:
Inflation
The unemployment rate
Global economic factors
The cash rate stayed at the then record low of 1.50% from 2016 to 2019, when the RBA lowered it further in response to low inflation and slightly higher unemployment.
Then as the Covid-19 pandemic began to hurt the Australian economy the RBA dropped the cash rate even further. This was to make borrowing cheaper and stimulate a struggling economy. The cash rate hit the record low of 0.10% during this time.
Now, with inflation soaring the RBA has lifted the cash rate very quickly to try to slow demand and curb price rises.
How does the RBA's cash rate decisions affect your finances?
The RBA can do 3 things with the cash rate: Raise, lower or hold the cash rate at its current level.
If the RBA lifts the cash rate
When the cash rate rises, most lenders pass on the rate rise to borrowers on variable rate home loans.
If the cash rate rises by 25 basis points, then most borrowers will see 25 basis points added to their home loan's interest rate.
If you have a fixed rate home loan nothing changes. Your rate is locked in for the duration of the fixed period.
When the RBA lowers the cash rate, most lenders pass on some if not all of the cut to borrowers on variable rate home loans.
Banks also lower rates on savings accounts and other products.
If you have a home loan, it's a good idea to check if your lender has actually passed on the rate cut to you. If it hasn't, you may need to switch.
If the RBA holds the cash rate
A hold decision means the cash rate isn't changing this month. This means that your home loan or savings account rate likely won't change. You don't really have to do anything.
But banks and lenders change interest rates all the time for various reasons even if the RBA doesn't move the cash rate.
More questions about the RBA cash rate
Lenders are free to change interest rates on their products whenever they want. The cash rate is a big influence on rates, but there are many other factors. This includes a lender's own funding costs, the amount of deposits the lender has and how competitive it wants to be to attract new customers.
The RBA changes the cash rate target based on a range of factors including inflation, the performance of the Aussie dollar, unemployment, the housing market, and Australia's Gross Domestic Product (GDP).
For example, if inflation rises above the target rate it means that Australians are spending their money too freely and prices are increasing too rapidly. But if the RBA raises interest rates to make it more expensive to borrow money, the economy will settle and price increases will slow down.
Conversely, the RBA will drop interest rates if inflation is too low and the economy is stagnating, encouraging more Australians to spend more money and stimulate economic growth.
The Reserve Bank of Australia is the country's central bank. The RBA's monetary policy has three key objectives which are set out in the Reserve Bank Act 1959:
The stability of the currency of Australia.
The maintenance of full employment in Australia.
The economic prosperity and welfare of the people of Australia.
Setting the official cash rate is one of the bank's key tools to influence monetary policy, inflation and the broader Australian economy. The bank's board meets on the first Tuesday of every month except January to set the cash rate. The RBA will either cut, raise or hold the cash rate.
The RBA's board of governors meets 8 times a year, in February, March, May, June, August, September, November and December. It is here that the board makes a decision on the official cash rate target.
The board used to meet 11 times a year, on every first Tuesday of the month apart from January. It lessened the number of times it meets to provide more time for change between meetings.
However, the RBA can alter the cash rate at any time outside of the meetings. This is rare, but can happen. In March 2020, in response to the onset of the COVID pandemic, the bank cut the cash rate twice. Once at the scheduled meeting and then again mid-month at a special emergency meeting.
Check out more RBA news and Finder's RBA survey press releases
Despite years of high-rate pain, many lenders have yet to announce plans to drop their rates for stressed mortgage holders, according to new analysis by Finder.
Aussie homeowners could be in for some much needed mortgage relief with the majority of experts predicting a rate cut from the RBA at its first meeting of the year.
Richard Whitten is Finder’s Money Editor, with over seven years of experience in home loans, property and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Graduate Certificate in Communications from Deakin University. See full bio
Richard's expertise
Richard has written 584 Finder guides across topics including:
When the RBA decreases the cash rate , does it mean it prints more money to increase money supply and thereby decreasing the borrowing rate. And if that is the case, does increasing the cash rate mean that the RBA has to extinguish some of the money supply thereby reducing the money available to borrow. I am assuming that RBA can’t just simply say the cash rate is this much, it has to increase/decrease money supply at the backend to make sure the cash rate stays at whatever level it wants to stay at.
Finder
RichardJune 18, 2022Finder
Hi,
The cash rate determines the interest rate lenders can charge when lending money to each other at short notice (also called the overnight cash rate). Lenders and banks are always moving money around to cover different investments and expenses, including funding for home loans.
So the cash rate affects their costs, and they pass this onto borrowers. Changing the cash rate target does nothing to the amount of money in the economy. It affects the cost of borrowing and lending money.
The RBA does in effect create money sometimes, in a process called quantitative easing. This involves purchasing bonds from investors at a favourable rate, freeing up investor cash to go elsewhere in the economy. This is different to the cash rate.
I hope this helps.
Regards,
Richard
octoJune 18, 2018
how long can AUD interest rate remain Low…..?
how soon will the AUD follow the US FED Rate Hike…….?
thank you
NikkiJune 20, 2018
Hi Octo!
Thanks for getting in touch!
To know more information on your questions, you can fill in your email address in the box provided and you’ll be updated on RBA’s decisions on the official cash rate target.
While we provide you with general information, please know that we don’t stand as a representation for RBA or any company featured on our site.
Hope that clarifies!
Cheers,
Nikki
TaneeshaMay 24, 2018
Do you think the cash rate will stay the same at the June RBA meeting?
Finder
JoshuaMay 24, 2018Finder
Hi Taneesha,
Thanks for getting in touch with finder. I hope all is well for you. :)
Unfortunately, we are not in the best place to make a prediction. However, you might get an idea whether the RBA cash rate will rise or fall by looking at the factors that affect it. These factors may include:
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
BrookMay 5, 2018
What do you think that how the international economic condition influence the cash rate?
Finder
JeniMay 6, 2018Finder
Hi Brook,
Thank you for getting in touch with Finder.
This is a nice question. Domestic financial conditions remain expansionary. There has been some tightening in short-term
money markets, which has flowed through to a small increase in funding costs for a range of financial institutions and businesses. However, borrowing rates remain low for households and businesses. Growth in housing credit has eased since mid last year, particularly for credit extended to investors, while growth in business debt has remained moderate. The Australian dollar remains within its narrow range of the past two years. Financial market prices suggest that the cash rate is expected to remain unchanged this year and to increase around mid 2019. If you are eager to learn more about the domestic financial condition according to RBA, refer to the Domestic Economic Conditions file.
I hope this helps.
Have a great day!
Cheers,
Jeni
RobJune 11, 2017
What do you think will be the next move for RBA on cash rate and when?
Thank you!
JonathanJune 11, 2017
Hi Rob!
Thanks for the comment.
As of the moment, most of resident rate experts predict that rates will be the same. The cash rate target is released on the first Tuesday of every month except January.
Thanks Jonathan, I meant in the longer term, 6-12 months.
JonathanJune 11, 2017
Hi Rob!
We appreciate your follow-up.
Currently, there are multiple factors that need to be considered and due to the volatility of these factors, it is a bit hard to conclude whether they’ll leave the rates unchanged for the next few months or not.
If you have further inquiries, you may contact:
Media and Communications
Secretary’s Department
Reserve Bank of Australia
SYDNEY
Phone: +61 2 9551 9720
Fax: +61 2 9551 8033
Email: rbainfo@rba.gov.au
Does the Reserve Bank try and sneak announce rate rises during the nation's biggest racing event? Here's what we know.
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When the RBA decreases the cash rate , does it mean it prints more money to increase money supply and thereby decreasing the borrowing rate. And if that is the case, does increasing the cash rate mean that the RBA has to extinguish some of the money supply thereby reducing the money available to borrow. I am assuming that RBA can’t just simply say the cash rate is this much, it has to increase/decrease money supply at the backend to make sure the cash rate stays at whatever level it wants to stay at.
Hi,
The cash rate determines the interest rate lenders can charge when lending money to each other at short notice (also called the overnight cash rate). Lenders and banks are always moving money around to cover different investments and expenses, including funding for home loans.
So the cash rate affects their costs, and they pass this onto borrowers. Changing the cash rate target does nothing to the amount of money in the economy. It affects the cost of borrowing and lending money.
The RBA does in effect create money sometimes, in a process called quantitative easing. This involves purchasing bonds from investors at a favourable rate, freeing up investor cash to go elsewhere in the economy. This is different to the cash rate.
I hope this helps.
Regards,
Richard
how long can AUD interest rate remain Low…..?
how soon will the AUD follow the US FED Rate Hike…….?
thank you
Hi Octo!
Thanks for getting in touch!
To know more information on your questions, you can fill in your email address in the box provided and you’ll be updated on RBA’s decisions on the official cash rate target.
While we provide you with general information, please know that we don’t stand as a representation for RBA or any company featured on our site.
Hope that clarifies!
Cheers,
Nikki
Do you think the cash rate will stay the same at the June RBA meeting?
Hi Taneesha,
Thanks for getting in touch with finder. I hope all is well for you. :)
Unfortunately, we are not in the best place to make a prediction. However, you might get an idea whether the RBA cash rate will rise or fall by looking at the factors that affect it. These factors may include:
– Household debt
– Inflation
– Wage growth
– Consumer Confidence Index
– Unemployment
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
What do you think that how the international economic condition influence the cash rate?
Hi Brook,
Thank you for getting in touch with Finder.
This is a nice question. Domestic financial conditions remain expansionary. There has been some tightening in short-term
money markets, which has flowed through to a small increase in funding costs for a range of financial institutions and businesses. However, borrowing rates remain low for households and businesses. Growth in housing credit has eased since mid last year, particularly for credit extended to investors, while growth in business debt has remained moderate. The Australian dollar remains within its narrow range of the past two years. Financial market prices suggest that the cash rate is expected to remain unchanged this year and to increase around mid 2019. If you are eager to learn more about the domestic financial condition according to RBA, refer to the Domestic Economic Conditions file.
I hope this helps.
Have a great day!
Cheers,
Jeni
What do you think will be the next move for RBA on cash rate and when?
Thank you!
Hi Rob!
Thanks for the comment.
As of the moment, most of resident rate experts predict that rates will be the same. The cash rate target is released on the first Tuesday of every month except January.
You can follow the updated RBA forecast through our website.
Hope this helps.
Cheers,
Jonathan
Thanks Jonathan, I meant in the longer term, 6-12 months.
Hi Rob!
We appreciate your follow-up.
Currently, there are multiple factors that need to be considered and due to the volatility of these factors, it is a bit hard to conclude whether they’ll leave the rates unchanged for the next few months or not.
If you have further inquiries, you may contact:
Media and Communications
Secretary’s Department
Reserve Bank of Australia
SYDNEY
Phone: +61 2 9551 9720
Fax: +61 2 9551 8033
Email: rbainfo@rba.gov.au
Hope this helps.
Cheers,
Jonathan