Relief likely as Reserve Bank tipped to hold cash rate
Mortgage holders may take a short break from further interest rate hikes, but the economic uncertainty in the Middle East will still remain uncertain for the Central Bank.
Economists are tipping the central bank to keep the official interest rate at 4.35 percent at its meeting on Tuesday.
If the predictions come true, the Central Bank will keep interest rates steady for the first time since the beginning of 2026.
Although inflation levels remain above the Central Bank’s target range of 2 to 3 percent, economists expect the impact of consecutive increases to be taken into account.
Westpac economists Luci Ellis and Neha Sharma said mixed data on inflation and the labor market supported a pause.
“We continue to expect the RBA to pause at its June meeting while it considers the data flow,” they said in a research note.
“But we believe it will remain focused on returning inflation to target and will be less affected by softer data than some observers might assume.”
Westpac said it expects mortgage holders to be affected by interest rate increases in August and September.
“This is consistent with the RBA’s priority to reduce inflation,” the note said.
“The monetary policy committee will consider soft outcomes for the consumer and housing sectors as a necessary part of monetary policy transmission.”
Commonwealth Bank’s head of Australian economies, Belinda Allen, said the Reserve Bank would be watching the Middle East to see how the results affected Australian markets.
“We expect the focus on inflation to continue as inflation remains very high and some uncertainty remains about the pace and extent of higher prices resulting from the conflict in the Middle East,” he said.
“We still expect a debate to take place in June between whether to raise interest rates or not. However, with little momentum towards a rate hike at this meeting, we expect the debate to quickly turn into a decision to hold it.”
The rate decision is the first since May’s federal budget, which introduced measures to limit the negative burden only for new homes and replace the 50 per cent cut in capital gains tax with an inflation-based rate.
The Reserve Bank will have the chance to outline the rationale for the rate decision when deputy governor Brad Jones speaks to the Australian Banking Association conference in Melbourne on Wednesday.
Wall Street investors continue to hold out hope for a peace deal with Iran.
US stocks closed higher on Friday, as shares of SpaceX rose in the largest IPO in history.
Dow Jones index increased by 0.70 percent to 51,202.26 points, S&P 500 index increased by 0.50 percent to 7,431.46 points and Nasdaq index increased by 0.31 percent to 25,888.84 points.
Australian stock futures rose 39 points, or 0.44 percent, to 21,317.
The S&P/ASX200 gained 170.8 points on Friday, rising 1.98 percent to 8,804 points, while the All Ordinaries index rose 169.4 points, or 1.92 percent, to 9,006.1 points.
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