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ISCOVER
Staff Reporter
While the Reserve Bank is expected to cut rates again in the not-too-distant future, the expectation of a Melbourne Cup day rate cut has fallen.
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A survey of Loan Market Group’s brokers found the majority believe the RBA will maintain the cash rate at its present level of 3.25 per cent at the November 6 board meeting.
Loan Market Group’s corporate spokesperson Paul Smith said the central bank’s decision to reduce the cash rate 25 basis points at its October meeting and a surprise rise in inflation during the September quarter had lowered expectations of a Melbourne Cup day windfall for mortgage holders.
He said 57 per cent of the 225 broker respondents thought there would not be another quarter percentage point cut on Tuesday.
“The RBA has form for taking action on the first Tuesday in November having moved rates on Cup day every year since 2006,” he said.
“But last week’s inflation data may see the central bank adopt a wait and see approach knowing they can still take some action in December.”
Mr Smith said if the RBA does reduce rates on Melbourne Cup day or at its next meeting in December, mortgage holders will benefit from the lower rates but they may see other costs rising.
“If the cash rate is dropped to record lows there could easily be a spike in inflation which could result in common costs-of-living going up rapidly, and that’s something the RBA will no doubt be considering carefully,” he said.
