RBA interest rates: Tuesday cut to 3.6 per cent widely tipped despite warning there’s no need to hurry

Australian borrowers are widely tipped to receive a third interest rate cut from the Reserve Bank on Tuesday despite warnings that there’s no need to rush. Lowering the cash rate by 25 points to 3.6 per cent would save a borrower with a $600,000 mortgage about $90 each month, according to Canstar. Hopes for another dose of relief have built after core inflation for the year to May dropped to the slowest pace since 2021. Growth has been weak, and the offshore threat of US President Donald Trump’s trade war looms large. But the central bank’s board also has reasons to hold fire at the two-day meeting, amid a strong jobs market and the ongoing risk that moving too quickly will respark inflation. Betashares chief economist David Bassanese said the RBA may “see sense at the 11th hour” and hold fire. “I’ve long been bewildered by the near-certain probability that markets have attached to a rate cut this week, despite a still firm labour market and volatility in the monthly (inflation) reports,” he said. “I’m less convinced it needs to hurry.” Mr Bassanese said core inflation was close to the top of the RBA’s target band only two months ago. “The RBA could easily wait for confirmation of lower underlying inflation in the quarterly CPI report later this month before cutting rates again in August.” That would also “help to hold off the impending house price boom”, Mr Bassanese said. Westpac chief economist Luci Ellis said there was no reason to wait until August to lower rates and the RBA should “just get on with it”. “The arguments to wait are not compelling,” she said. “Nothing the RBA will learn in the subsequent five weeks will change the decision to cut.” The threat of Mr Trump’s tariffs drove the RBA to pick “the path of least regret” in May by lowering rates. Mr Trump had been expected to lock in trade tax hikes this week but has reportedly delayed a final call until next month. The trade storm and growing confidence that inflation has come under control mean investors tip the chances of a rare cut at more than 90 per cent. But the RBA will also need to mull the history of previous cost of living crises, when dialling down the pressure too fast led inflation to swiftly bounce back. ANZ predicted the RBA will move on Tuesday and then again in August, followed by an “extended pause” holding the cash rate at 3.35 per cent. Demand for workers remains strong and has been rising, according to the big four bank’s latest job vacancy data. “Given the ongoing tightness in Australia’s labour market and the overall resilience in its economy, we maintain our expectation that this easing cycle will be relatively shallow,” ANZ’ Aaron Luk said.