These graphs show movements in the official cash rate over time and changes to the market's lowest home loan rates over the same period. You can see how the market responds by raising or lowering rates broadly in line with the RBA's decisions.
How often are Finder's expert predictions correct?
The latest cash rate analysis from the experts
Finder regularly surveys 40+ economists and property experts to forecast the RBA's next cash rate decision and get insights into the future of the Australian economy. Here are the most recent cash rate predictions.
I think the RBA should keep interest rates on hold at its August meeting for two reasons. First, June quarter trimmed mean annual CPI inflation is still 2.7%, which is high within the 2–3% target band and slightly above the RBA’s forecast of 2.6%. Second, the RBA has already cut rates twice this year, giving it scope to pause and assess the impact before moving further.
This time they will, right? The markets are right in their assessment that the cash rate is on a downward-sloping trajectory. Last month's decision to HOLD does not contradict this. Unsurprisingly, this month, similarly to July, my predictions indicate a CUT. The predictive intervals do not contain the current cash rate value, but they include a 25bp cut. The forecast mean suggests a 15bp decrease. My forecasts are available at: https://forecasting-cash-rate.github.io/
The Reserve Bank Board exercised caution at its last meeting, but since then we’ve seen the ABS’s June quarter Consumer Price Index show that the headline inflation rate remains within the RBA’s target band, up 2.1% annually. My view is this will give the RBA the confidence it needs to cut interest rates for the third time this year.
The markets got confused by previous RBA commentary that suggested a change in reaction function. All along, they hadn't shifted their focus from the quarterly CPI print. That was roughly where the RBA wanted it to be, so with the labour market also looking shaky, there's no reason not to cut.
The market expects a cut in the cash rate given the most recent inflation data which shows a continued downward trend in inflation. An increase in the unemployment rate also points to a softening in the labour market.
The quarterly inflation data is in line with the RBA's expectations and is comfortably within the target band. Coupled with softening in the labour market, there is a good case for a rate cut.
The latest inflation data fall within the Bank’s target range. The latest labour market data show a distinct weakening. The Bank is therefore likely to cut.
I think the RBA will cut rates in August. Inflation is contained, the jobs market has softened and global growth is slowing, so the case for easing is strong. For property markets, a cut should lift buyer confidence, and while listings remain low, it could also encourage more vendors to list.
The quarterly inflation data confirmed that inflation, including trimmed mean, is coming down and within the 2-3 target range. Also, there are some indications of a weaker labour market.
Core inflation (trimmed mean) fell to 2.7% annual, now inside the RBA’s 2–3% target band—its lowest since late 2021. Headline CPI dropped to around 2.1% in June, easing pricing pressures. Weaker inflation, subdued spending, and a still-tight labor market support the case for gradual easing.
Political pressure - inflation is still in the economy and prices on key items like housing; utilities; food and other essentials are still rising. Ordinarily the RBA may choose to hold rates, but political and social pressures for a rate cut will probably prevail
At the last board meeting, the governor, Michele Bullock, hinted that they were just waiting to be convinced about getting inflation within a certain band, and that seems to have happened.
I expect the RBA to cut rates on August 12th by at least 25bp: a 50 basis point cut appears unlikely given recent RBA comments however 35bp (down to 3.5 %) would be a sensible compromise.
Monthly inflation readings have been falling precipitously for a while. The March quarter CPI report showed headline and underlying inflation within the RBA's target range (2.1% & 2.7% respectively). The monthly June CPI rate was 1.9% below the bottom of the RBA's target range; the first time this has happened since early-2021. The RBA has already felt sufficiently confident to cut rates at its February and May meetings and, if anything, the inflation situation appears to have moderated even more since then. Given that the Federal election has been held, and the increased geopolitical uncertainty, there seems to be little (apart from inexorably increasing house prices and continued full-employment) stopping the RBA moving to ease further now.
Last month, the board needed further evidence that inflation was on the decline and decided to play it safe with a hold. With new data confirming the decline of core inflation to 2.7% from the 12 months leading to June, I believe the board members may be more confident about a cut.
Underlying' inflation now very clearly in the RBA target range and good reasons to be confident that it is 'sustainably' so; monetary policy is still restrictive (but doesn't need to be as restrictive now as ir currently is); last two labour market reports have been 'soft'.
The RBA was waiting to see the result of the quarterly CPI figure and annual pace of headline inflation, at 2.1%yr, is now down to the bottom of the RBA target band meaning they should have the confidence to make a right cup this month
Inflation is sustainably in the RBA’s target range. The cash rate needs to be returned to neutral. The RBA has more than sufficiently proven its strong commitment to its inflation target.
Underlying inflation is falling as the RBA expected and is now around the mid point of its target, the risks to unemployment are shifting to the upside and monetary policy is still tight so it makes sense to continue easing.
The latest ABS June quarter CPI data has clealrly matched the RBA's implied preconditions for a rate cut with the monthly data indicating continued weakening of inflation. Recent easing of the labour market also adds to the case for an August rate cut
Trimmed mean inflation has fallen again since the last RBA meeting, down to 2.7% in the 12 months to the June quarter, putting it firmly in the RBA's target range. Buyers - and mortgage holders, for that matter - are hoping for a rate cut. At Loan Market, pre-approved buyer numbers are more than 50% higher than they were 12 months ago. Buyers are getting their finances in order ahead of the spring real estate season, weighing up their options, and positioning themselves to act. Buyers want to walk into an auction with confidence or put forward strong private treaty terms that help them stand out from the crowd.
Inflation has remained within the target range for some time, while unemployment has risen slightly. Ongoing uncertainty from unpredictable 'Trump Tariff' policies and the geopolitical tensions around the world have slowed the global economy. Due to these issues, the RBA may consider lowering interest rates.
The RBA showed an abundance of caution in keeping rates on hold in July. Since then, we've seen more evidence that the labour market is softening. Moreover, the Q2 CPI did not contain any red flags around core inflation pressures. This paves the way for an August rate cut.
Inflation is within the RBA's mandated target range of 2-3 per cent.
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The Reserve Bank of Australia sets the official cash rate target. This is a benchmark rate that has a big impact on home loan interest rates, savings accounts and other credit products.
What is the official cash rate?
One of the Reserve Bank's primary roles is setting monetary policy for the Australian economy. This involves setting the cash rate (or to use its full name, the official cash rate target).
At a technical level, the cash rate is actually the interest rate banks pay for borrowing money from each other overnight. Banks use this to manage liquidity and issue funds as needed.
Australian banks can borrow and deposit money with the RBA at just below the current cash rate target.
How the official cash rate target affects interest rates
But for the average Australian consumer, the cash rate is really useful as a broad benchmark for the interest rates on home loans and savings accounts. A high cash rate makes borrowing money more expensive and sees home loan repayments rise.
A low cash rate makes it cheaper to borrow money. This boosts borrowing and spending.
How has the cash rate changed over time?
The Reserve Bank adjusts the official cash rate target over time in response to various economic data, including:
Inflation
The unemployment rate
Global economic factors
The cash rate stayed at the then record low of 1.50% from 2016 to 2019, when the RBA lowered it further in response to low inflation and slightly higher unemployment.
Then as the Covid-19 pandemic began to hurt the Australian economy the RBA dropped the cash rate even further. This was to make borrowing cheaper and stimulate a struggling economy. The cash rate hit the record low of 0.10% during this time.
Now, with inflation soaring the RBA has lifted the cash rate very quickly to try to slow demand and curb price rises.
How does the RBA's cash rate decisions affect your finances?
The RBA can do 3 things with the cash rate: Raise, lower or hold the cash rate at its current level.
If the RBA lifts the cash rate
When the cash rate rises, most lenders pass on the rate rise to borrowers on variable rate home loans.
If the cash rate rises by 25 basis points, then most borrowers will see 25 basis points added to their home loan's interest rate.
If you have a fixed rate home loan nothing changes. Your rate is locked in for the duration of the fixed period.
When the RBA lowers the cash rate, most lenders pass on some if not all of the cut to borrowers on variable rate home loans.
Banks also lower rates on savings accounts and other products.
If you have a home loan, it's a good idea to check if your lender has actually passed on the rate cut to you. If it hasn't, you may need to switch.
If the RBA holds the cash rate
A hold decision means the cash rate isn't changing this month. This means that your home loan or savings account rate likely won't change. You don't really have to do anything.
But banks and lenders change interest rates all the time for various reasons even if the RBA doesn't move the cash rate.
Calculate how much a cash rate cut will impact your home loan repayments
Enter your loan amount, current interest rate and the latest cash rate change to quickly estimate how much your monthly repayments will change, and what your new repayment will be.
Example: how changes to the cash rate can change your loan repayments
You have a $600,000 home loan with a variable interest rate of 6.00%. It's a 30-year loan term with principal-and-interest repayments.
Your monthly repayments are $3,598.
⬆️ If the cash rate rises by 25 basis points your interest rate would increase to 6.25%. Your monthly repayments would now be $3,695. This would cost you an extra $97 a month or $1,164 a year.
⬇️ If the cash rate decreases by 25 basis points your interest rate would fall to 5.75%. Your monthly repayments would now be $3,502. This would save you $96 a month or $1,152 a year.
More questions about the RBA cash rate
Lenders are free to change interest rates on their products whenever they want. The cash rate is a big influence on rates, but there are many other factors. This includes a lender's own funding costs, the amount of deposits the lender has and how competitive it wants to be to attract new customers.
The RBA changes the cash rate target based on a range of factors including inflation, the performance of the Aussie dollar, unemployment, the housing market, and Australia's Gross Domestic Product (GDP).
For example, if inflation rises above the target rate it means that Australians are spending their money too freely and prices are increasing too rapidly. But if the RBA raises interest rates to make it more expensive to borrow money, the economy will settle and price increases will slow down.
Conversely, the RBA will drop interest rates if inflation is too low and the economy is stagnating, encouraging more Australians to spend more money and stimulate economic growth.
The Reserve Bank of Australia is the country's central bank. The RBA's monetary policy has three key objectives which are set out in the Reserve Bank Act 1959:
The stability of the currency of Australia.
The maintenance of full employment in Australia.
The economic prosperity and welfare of the people of Australia.
Setting the official cash rate is one of the bank's key tools to influence monetary policy, inflation and the broader Australian economy. The bank's board meets on the first Tuesday of every month except January to set the cash rate. The RBA will either cut, raise or hold the cash rate.
The RBA's board of governors meets 8 times a year, in February, March, May, June, August, September, November and December. It is here that the board makes a decision on the official cash rate target.
The board used to meet 11 times a year, on every first Tuesday of the month apart from January. It lessened the number of times it meets to provide more time for change between meetings.
However, the RBA can alter the cash rate at any time outside of the meetings. This is rare, but can happen. In March 2020, in response to the onset of the COVID pandemic, the bank cut the cash rate twice. Once at the scheduled meeting and then again mid-month at a special emergency meeting.
Check out more RBA news and Finder's RBA survey press releases
After the RBA cut interest rates for the third time this year, it's a great time for borrowers to assess their own rate. But finding a lower rate doesn't always mean you should switch.
Home loan borrowers and first home buyers will be breathing a sigh of relief after the RBA announced a cut to the cash rate for the second time this year.
Richard Whitten is Finder’s Senior Money Editor, with over eight years of experience in home loans, property, credit cards and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard started his career in education and textbook publishing in South Korea. He holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Bachelor of Education from the University of Sydney and a Graduate Certificate in Communications from Deakin University. See full bio
Richard's expertise
Richard has written 657 Finder guides across topics including:
At this stage it’s impossible to say. The outlook for the moment is for rates to either fall slightly further or stay where they are, over the next 6-12 months.
Beyond that we just don’t know. For rates to start rising we’d need to see a big increase in inflation at least.
CuteyJune 16, 2022
When the RBA decreases the cash rate , does it mean it prints more money to increase money supply and thereby decreasing the borrowing rate. And if that is the case, does increasing the cash rate mean that the RBA has to extinguish some of the money supply thereby reducing the money available to borrow. I am assuming that RBA can’t just simply say the cash rate is this much, it has to increase/decrease money supply at the backend to make sure the cash rate stays at whatever level it wants to stay at.
Finder
RichardJune 18, 2022Finder
Hi,
The cash rate determines the interest rate lenders can charge when lending money to each other at short notice (also called the overnight cash rate). Lenders and banks are always moving money around to cover different investments and expenses, including funding for home loans.
So the cash rate affects their costs, and they pass this onto borrowers. Changing the cash rate target does nothing to the amount of money in the economy. It affects the cost of borrowing and lending money.
The RBA does in effect create money sometimes, in a process called quantitative easing. This involves purchasing bonds from investors at a favourable rate, freeing up investor cash to go elsewhere in the economy. This is different to the cash rate.
I hope this helps.
Regards,
Richard
octoJune 18, 2018
how long can AUD interest rate remain Low…..?
how soon will the AUD follow the US FED Rate Hike…….?
thank you
NikkiJune 20, 2018
Hi Octo!
Thanks for getting in touch!
To know more information on your questions, you can fill in your email address in the box provided and you’ll be updated on RBA’s decisions on the official cash rate target.
While we provide you with general information, please know that we don’t stand as a representation for RBA or any company featured on our site.
Hope that clarifies!
Cheers,
Nikki
TaneeshaMay 24, 2018
Do you think the cash rate will stay the same at the June RBA meeting?
Finder
JoshuaMay 24, 2018Finder
Hi Taneesha,
Thanks for getting in touch with finder. I hope all is well for you. :)
Unfortunately, we are not in the best place to make a prediction. However, you might get an idea whether the RBA cash rate will rise or fall by looking at the factors that affect it. These factors may include:
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
BrookMay 5, 2018
What do you think that how the international economic condition influence the cash rate?
Finder
JeniMay 6, 2018Finder
Hi Brook,
Thank you for getting in touch with Finder.
This is a nice question. Domestic financial conditions remain expansionary. There has been some tightening in short-term
money markets, which has flowed through to a small increase in funding costs for a range of financial institutions and businesses. However, borrowing rates remain low for households and businesses. Growth in housing credit has eased since mid last year, particularly for credit extended to investors, while growth in business debt has remained moderate. The Australian dollar remains within its narrow range of the past two years. Financial market prices suggest that the cash rate is expected to remain unchanged this year and to increase around mid 2019. If you are eager to learn more about the domestic financial condition according to RBA, refer to the Domestic Economic Conditions file.
Does the Reserve Bank try and sneak announce rate rises during the nation's biggest racing event? Here's what we know.
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when will rates increase
Hi Mark,
At this stage it’s impossible to say. The outlook for the moment is for rates to either fall slightly further or stay where they are, over the next 6-12 months.
Beyond that we just don’t know. For rates to start rising we’d need to see a big increase in inflation at least.
When the RBA decreases the cash rate , does it mean it prints more money to increase money supply and thereby decreasing the borrowing rate. And if that is the case, does increasing the cash rate mean that the RBA has to extinguish some of the money supply thereby reducing the money available to borrow. I am assuming that RBA can’t just simply say the cash rate is this much, it has to increase/decrease money supply at the backend to make sure the cash rate stays at whatever level it wants to stay at.
Hi,
The cash rate determines the interest rate lenders can charge when lending money to each other at short notice (also called the overnight cash rate). Lenders and banks are always moving money around to cover different investments and expenses, including funding for home loans.
So the cash rate affects their costs, and they pass this onto borrowers. Changing the cash rate target does nothing to the amount of money in the economy. It affects the cost of borrowing and lending money.
The RBA does in effect create money sometimes, in a process called quantitative easing. This involves purchasing bonds from investors at a favourable rate, freeing up investor cash to go elsewhere in the economy. This is different to the cash rate.
I hope this helps.
Regards,
Richard
how long can AUD interest rate remain Low…..?
how soon will the AUD follow the US FED Rate Hike…….?
thank you
Hi Octo!
Thanks for getting in touch!
To know more information on your questions, you can fill in your email address in the box provided and you’ll be updated on RBA’s decisions on the official cash rate target.
While we provide you with general information, please know that we don’t stand as a representation for RBA or any company featured on our site.
Hope that clarifies!
Cheers,
Nikki
Do you think the cash rate will stay the same at the June RBA meeting?
Hi Taneesha,
Thanks for getting in touch with finder. I hope all is well for you. :)
Unfortunately, we are not in the best place to make a prediction. However, you might get an idea whether the RBA cash rate will rise or fall by looking at the factors that affect it. These factors may include:
– Household debt
– Inflation
– Wage growth
– Consumer Confidence Index
– Unemployment
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
What do you think that how the international economic condition influence the cash rate?
Hi Brook,
Thank you for getting in touch with Finder.
This is a nice question. Domestic financial conditions remain expansionary. There has been some tightening in short-term
money markets, which has flowed through to a small increase in funding costs for a range of financial institutions and businesses. However, borrowing rates remain low for households and businesses. Growth in housing credit has eased since mid last year, particularly for credit extended to investors, while growth in business debt has remained moderate. The Australian dollar remains within its narrow range of the past two years. Financial market prices suggest that the cash rate is expected to remain unchanged this year and to increase around mid 2019. If you are eager to learn more about the domestic financial condition according to RBA, refer to the Domestic Economic Conditions file.
I hope this helps.
Have a great day!
Cheers,
Jeni