RBA Expected to Cut Cash Rate to 3.85% Tomorrow

The Reserve Bank of Australia (RBA) is widely expected to announce a 25 basis point rate cut, lowering the cash rate to 3.85%, marking the second cut this year and the first time the rate has fallen below 4% in almost two years. While some economists and market participants anticipate a possible 50 basis point cut, the consensus leans towards a cautious easing cycle with potentially one or two more cuts in 2025. Despite easing price pressures and a pause in US-China trade tensions, the RBA is expected to maintain a cautious stance due to lingering global risks and solid employment growth. Major banks forecast varied paths for future cuts, with some predicting up to three further reductions by early 2026, although the timing and extent of rate cuts remain uncertain. Homeowners may see delayed or limited relief on mortgage repayments as lenders may not immediately pass on the cuts. Overall, the RBA aims to balance supporting the economy while remaining vigilant against inflation and external uncertainties.