Despite a collective sigh of relief thanks to the February interest rate cuts, the RBA has decided to take the slow and steady route - holding April’s cash rate at 4.10%. 

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If history taught us anything, this shouldn’t be too surprising given the long cash rate pause between November 2023 and February 2025. It’s well known that the RBA likes to “remain cautious” with policy easing.

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Economists from all four major banks also predicted the rate would remain steady in April, but some are forecasting interest rate cuts later in the year. 

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Why did economists expect interest rates to stay the same in April?

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👉 More time to assess: In the last announcement, the RBA made their first interest rate cut in a very long time. The flow on effects to household spending, business investments, employment rates, etc. all take time to reveal itself. Economists think the RBA is waiting to gather more information before making any further changes.  

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👉 Keeping an eye on inflation: The RBA aims to keep inflation within the target 2-3% range. While the annual trimmed mean inflation (the preferred measure of inflation) was sitting comfortably at 2.7% in February, economists believe the RBA is looking out for evidence that it will remain there. Quarter 1 2025 CPI figures are due on April 30th, and this might tip the scale for the next interest rate announcement happening May 20.

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👉 Global uncertainty: Some concerns remain about global economic factors, like trade tensions and international monetary policy, which economists believe are yet another reason for the RBA to remain ever cautious. 

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Why are cuts expected later in the year?

The four major banks have all cast their votes and believe some interest rate cuts are due later in the year.

• ANZ: One more cut — which won't be until August, when the bank forecasts a 3.85 per cent cash rate
• Commonwealth Bank: Two more cuts — expecting it to get down to 3.35 per cent in December
• NAB: At least three more cuts this year — expecting it to get down to 3.35 per cent in December
• Westpac: Three more cuts this year — expecting it to get down to 3.35 per cent in November

From May 2022 to June 2023, the RBA went hardcore with 13 consecutive cash rate hikes to tighten spending and slow down inflation. Some economists believe the RBA has achieved its goal of getting inflation under control, and with many still struggling with high cost of living, a rate cut could give Aussie households some much needed relief.  

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Remind me, what happens when the cash rate is cut?

When the RBA cuts the cash rate, the banks will almost always (hopefully) follow suit and cut the interest rate on your loan. 

Experts say it takes around two or three months for individuals to feel the full impact of a rate rise on their cash flow.

The good news for homeowners is that it could cut the cost of your home loan. The bad news for savers is that it will likely cut the interest rate on your savings account too.