Interest rates: Australian investors must ask one big question about the RBA

That’s not surprising. The near-14 per cent gain on the ASX 200 since the end of last October has been predicated on rate cuts arriving in the second half of this year and while governor Michele Bullock is giving few hints as to when she might begin an easing cycle, the fact that rate hikes seem an increasingly distant prospect is a little win.

Bullock wasn’t biting on Tuesday afternoon when asked for her view on local traders’ views on rate cuts; currently one-and-a-bit 0.25 per cent cuts are priced in before the end of the year.“The jump in relation to various bits of news, they jump in relation to various bits of commentary. I suspect they’ll be jumping as I’m speaking today.”

“What the board is basically saying is that we are uncertain, we don’t know, and we can’t rule in or out,” Bullock said.That leaves the way open for the usual guessing game to begin. Dovish market economists continue to see a need for the RBA to cut in August or September, as the central bank’s primary concern flips from taming inflation to supporting a weakening economy.

Clearly, that will be sweet relief for big parts of the economy. But it’s also worth noting that even a 3 per cent interest rate would be much higher than Australia has known in the last decade. The cash rate fell below 3 per cent in May 2013, and stayed below 3 per cent until December 2022.

Source: Financial Digest (financialdigest.net)

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