RBA holds cash rate 0.25% ahead of tonight's Federal Budget
Prospective mortgage holders, those with variable loans or those looking to refinance have been denied further relief from the Reserve Bank of Australia (RBA), which decided to hold the cash rate at 0.25%.
While RBA governor Philip Lowe left the door open to further cuts, increases to the cash rate seem unlikely given low inflation and high unemployment, the latter of which Lowe referred to as an "important national priority".
Despite acknowledging that the impact of COVID-19 on unemployment will be less than previously expected, "unemployment and underemployment are likely to remain high for an extended period".
The decision was widely expected.
"The cash rate has fallen by 125 basis points over the last year and a half- 15 more is unlikely to make much of a difference beyond making the RBA feel like they are at least doing something," says Graham Cooke from Finder.
"The decision to hold the rate for now also suggests that the RBA wants to assess the budget in detail before making a decision about further moves," he said.
Mortgage Choice CEO Susan Mitchell agrees that a cut to the rate was a long shot.
"Although a case could be made for a cut this month, I think the RBA will keep the cash rate unchanged at its October monetary policy meeting.
"Board members will wait to digest the Federal Budget announcement before making their next move," Mitchell said.
But this didn't stop some experts musing the possibility of a rate cut.
Westpac chief economist Bill Evans had predicted a cut of 0.1%, a much smaller increment than the usual 0.25% - a reflection of how close rates are getting to the zero bound.
Shane Oliver from AMP Capital similarly expected a cut because the inflation and employment are falling short of the RBA's targets.
"Our base case is that the RBA will cut the cash rate, the Term Funding Facility rate and the three year bond yield target to 0.1% on Tuesday so as to present a united "Team Australia" front with fiscal policy on the same day and thereby get a bigger impact," he said on Friday.
Alas, Team Australia will remain on the bench.
Stephen Miller believes that rather than Team Australia, the decision to hold was in part to keep the spotlight on today's star player - the Federal Budget.
"The RBA Governor has long been a strong advocate for fiscal stimulus as a complement to the monetary measures thus far enacted to combat the consequences of the COVID pandemic."
Looking ahead, a Finder survey of 40 experts and economists found that 22% of respondents expect a cut come November.
Even though the RBA held fire on cutting the cash rate, Mitchell still believes it's a good time for first home buyers or those refinancing.
"The home loan market is extremely competitive at the moment so it's a good idea to engage the guidance of an experienced mortgage broker."