Here’s why we could get an interest rate cut on Tuesday

Official interest rates are poised to hit a new historic low of 1.75 per cent when the Reserve Bank Board meets this Tuesday on the back of last week’s shock consumer price index results.

A RateCity.com.au analysis of national and international economic indicators shows that the disappointing inflation figures could be enough to disrupt the RBA’s year-long holding pattern.

Sally Tindall, money editor at RateCity.com.au, said the chances of a budget-day cut were over 50 per cent.

“Australians should get set for a rate cut, if not this month then within the following two months,”

“The RBA has held an easing bias since October. Last week’s inflation figures should be the final straw.

“Inflation is now at 1.3 per cent and core inflation at 1.55 per cent, which is undeniably well below the RBA’s own target rate — a fact they will find hard to ignore.

“Despite a last-minute plunge, the relatively high dollar will also add to the RBA’s woes,” she said.

“If the RBA does deliver a cut, the big question for mortgage holders on Tuesday won’t be around the budget, but rather whether their bank will pass this savings on.”

“But with the cash rate decision set to be announced hours before Scott Morrison delivers his first Federal Budget and employment figures still holding up, the RBA may opt to wait and see if there’s a post-budget bounce in confidence.”

Originally published at .