Reserve Bank’s Bullock tipped to deliver more rate relief

Household borrowers are poised for another reduction in mortgage repayments, with the Reserve Bank expected to lower the cash rate to 3.6 per cent on Tuesday.

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Household borrowers are tipped to receive another round of interest rate relief when the Reserve Bank reveals its next cash rate call on Tuesday, as economists look to governor Michele Bullock for guidance on how much borrowing costs can be further trimmed.

With traders viewing recent inflation data as a clear indication that the RBA has the scope to loosen monetary policy, money markets are almost fully priced for the central bank to deliver a third quarter percentage point rate cut since it started to ease earlier this year.

That move would take the cash rate to 3.6 per cent – its lowest level since mid-2023 – and follow cuts in May and February. For borrowers with a typical $600,000 mortgage, the combined impact of those three cuts would reduce monthly repayments by almost $300.

Reserve Bank governor Michele Bullock at a press conference in May. Picture: Nikki Short/NewsWire

“Ultimately, the case to cut will be the stronger one,” Commonwealth Bank senior economist ­Belinda Allen said ahead of the ­decision, citing the recent run of soft economic data and the RBA’s previous forecasts which pointed towards the need to “further reduce” the cash rate.

While economists overwhelmingly agreed another rate cut was on the cards, the low jobless rate and continued upheaval in international trade wrought by Donald Trump’s aggressive pursuit of tariffs are among the reasons the RBA could stay on the sidelines.

Citi chief economist Josh Williamson was one of the few analysts not predicting an interest rate cut, arguing the central bank would instead stick with the “safe option” to wait until its following meeting, scheduled for August 11-12, before making its next move.

By that time, Mr Williamson noted, the RBA would have received more comprehensive quarterly inflation figures, slated for release at the end of July, along with updated insights from its business liaison program, which monitors conditions across the private sector.

“By waiting another five weeks to get more data and liaison evidence, the RBA would fulfil its preference to “move cautiously and predictably” in lowering interest rates,” Mr Williamson said.

Also complicating predictions is the appointment of freshly minted Treasury secretary Jenny Wilkinson to the RBA’s rate-setting committee, whose views may ­differ from her predecessor Steven Kennedy.

Barring a surprise decision to hold the cash rate at 3.85 per cent, focus will instead shift to the depth and pace of rate cuts before reaching the so-called terminal rate – the point at which cuts are expected to end – which economists put at an average of 3.1 per cent.

Markets are more bullish on rate cuts and are priced for almost three follow-up reductions by the end of the year, which, if realised, would take the official cash rate even lower to just 2.85 per cent.

But Jonathan Kearns, the former head of the RBA’s financial stability department turned Challenger chief economist, said market expectations for three rate cuts this year – up from two in March – weren’t justified, given domestic inflation and employment data had largely met expectations.

“The biggest mover of rate expectations was President Trump’s April tariff announcement, and then winding back of tariff expectations leading up to the May 12 pause of tariffs on China,” he said.

Also of keen interest to RBA watchers at Tuesday’s post-meeting press conference will be any details Ms Bullock imparts regarding requirements for board members to give speeches – delivering on a sweeping review of the central bank in 2023.

The governor is similarly expected to be subjected to questioning on an updated statement on the conduct of monetary policy, a formal agreement between the RBA and the Treasurer, which codifies several recommendations of the review including plans to publish unattributed votes.