Millions of mortgage holders will be eagerly watching what emerges from the meeting of the Reserve Bank of Australia (RBA) starting today.
The consensus of opinion by economic experts is that the central bank will announce at 2.30pm tomorrow that interest rates will stay on hold at 4.35 per cent.
This school of thought is powered by recent data showing Australia’s inflation rose slightly to 3.8 per cent, still above the RBA’s target of 2 per cent to 3 per cent, but in line with market predictions.
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Added to this was the critical underlying inflation figure which dropped from 4 per cent to 3.9 per cent.
These sets of figures effectively killed off arguments for the RBA to raise the cash rate – the figure that largely determines how much commercial banks charge customers for loans.
These will be at the front of the minds of the RBA board as it plots its next move today and tomorrow.
For months it has been walking a narrow path between its core objective of hammering inflation, yet seeking not to unleash more pain for mortgage holders by raising the cash rate – its single blunt weapon.
Events overseas will also weigh on the minds of the RBA board members.
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Last week the United States Federal Reserve kept interest rates unchanged in the 5.25 per cent to 5.50 per cent range.
Economists believe this almost certainly guarantees a cut in US interest rates when the Fed meets next month.
The news helped trigger a surge for the Australian share market last week and for some commentators to put the case for the RBA to cut rates this year.
That still appears optimistic, with the earliest likely date for a cut in the Australian cash rate not expected until December and some forecasts mortgage holders will have to wait until next February.
But the die seems cast for a gradual easing of interest rates in the months ahead.
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