Reserve Bank unlikely to cut the cash rate... just yet

The Reserve Bank is set to hand down their cash rate decision tomorrow, with speculation rapidly mounting that a rate cut is on the cards.

RateCity’s RateUlator, which analyses 18 economic indications in the lead up to the RBA announcement each month, shows that eight categories are pointing to a cut, up from four from the previous month.

RateCity’s Money Editor Sally Tindall said that home loan rates, inflation and the property market would be key factors in the Central Bank’s decision-making tomorrow.

“The move by the big four banks to lift their variable home loan rates this month has provided the RBA with a huge incentive to counter this rise,” she said.

“Inflation has also been lower than expected which is another reason for Glenn Stevens to consider a cut to give our economy a kick along in the lead up to Christmas.

“While these factors all point towards a rate cut, we’re betting the RBA will bank it for another day,” she said.

Last month, Glenn Stevens said there was some spare capacity in the economy for ‘some time yet’, providing a clear indication that the bank is happy with the current cash rate.

“The Reserve Bank is renowned for making well-reasoned decisions, which is why they are likely to wait it out for at least another month to better monitor the economic landscape and the effect the big bank rate hike will have on the housing market,” Ms Tindall said.

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