It’s almost certain the Reserve Bank of Australia will hand mortgage holders an interest rates cut today, but new research shows inflation continues to plague the economy.
Economists are tipping the central bank will announce at 2.30pm (AEST) a 25 basis point cut, which would bring the official cash rate down to 3.60 per cent.
If banks pass this on in full, a homeowner with a $500,000 mortgage will save $2884 per year compared with what they were paying at the start of the year before the RBA started cutting the cash rate.
A widely anticipated reduction failed to materialise last month, when the cash rate remained on hold at 3.85 per cent, stunning mortgage owners.
But economists say the RBA board has no excuses not to make a cut this week, with the latest quarterly data showing inflation is within its target range of between 2 per cent and 3 per cent.
Headline inflation dropped to 2.1 per cent, the lowest figure in four years.
A softening labour market has also bolstered expectations that the cash rate will come down.
The market is even pricing in a roughly fifty-fifty chance of a supersized 50-basis-point cut which would bring the official cash rate down to 3.35 per cent.
But despite falling inflation, new data reveals that everyday costs remain high for Australians who continue to feel the squeeze.
An investigation by The Age found that households are cutting back on spending, such as buying coffee out, entertainment and holiday travel.
