PHOTO: 9NEWS
Possible Cash Rate Cut in Australia: What to Expect in 2025
The Reserve Bank of Australia (RBA) has kept its cash rate target on hold at 4.35% since November 2023. However, recent forecasts suggest that 2025 could bring some relief for borrowers, with expectations of at least one 0.25 percentage point cut.
Why the Expected Cut?
Economists and financial markets are predicting a rate cut due to several factors:
- Economic Slowdown: The uneven economic performance in 2024 has led to expectations of a softer economy, which typically prompts central banks to lower interest rates to stimulate growth.
- Inflation Control: While inflation has been a significant concern, recent data indicates a substantial decline in headline inflation, which may allow the RBA to consider easing monetary policy.
- Global Trends: Other central banks, including the US Federal Reserve, are expected to cut rates, influencing the RBA’s decision-making process.
Potential Impact
If the RBA does cut rates, it could have several effects:
- Home Loan Repayments: Borrowers may see a reduction in their repayments, providing some financial relief.
- Property Market: A rate cut could stimulate activity in the property market, potentially driving prices higher and making it more challenging for first-time buyers.
- Savings: Deposit holders might experience lower returns, as term deposit rates could decrease further.
Key Dates to Watch
The RBA board will meet eight times in 2025, with the first meeting scheduled for February 17-18. Financial markets are pricing in a high probability of a rate cut at this meeting.
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