RBA's Christmas present?

Central bank indicates further rate cuts may be coming

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Mortgage holders could be in line for an early Christmas present next month, courtesy of The Reserve Bank of Australia (RBA).

In minutes of the bank's last board meeting, released today, the RBA said "Members considered that further easing may be appropriate in the period ahead." A translation of that into plain English suggests that further official interest rate cuts may be likely, and with the next bank meeting early in December, we could see a rate cut before Christmas.

Of course we'd need the banks including Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank (ASX: NAB), Westpac Banking Corporation (ASX: WBC) and Commonwealth Bank of Australia (ASX: CBA) to play ball and pass on most, if not all of the rate cut to borrowers. With the banks' net interest margins under pressure, it's likely that the banks could again withhold some of the cut. If the RBA does cut rates, ANZ borrowers may not see any benefit until the end of the month – ANZ has moved to updating its interest rates on a monthly basis, rather than follow the RBA.

For those investors with large bank deposits, or funds invested in term deposits, a rate cut wouldn't be great news, as deposit interest rates will likely fall by the full cut in the official cash rate.

In the minutes, the RBA said a mix of improved global conditions, higher inflation and domestic economic uncertainty prompted it to keep the cash rate unchanged at 3.25% in November, but conditions could change between now and the next meeting. If the outlook for the international economy deteriorates, or if signs suggest Australian growth is slowing, then we could see a cut in December.

Most economists expect the RBA to cut rates either in December or February next year (The central bank doesn't meet in January).

The Foolish bottom line

We here at the Motley Fool have decided not to try predicting interest rate movements, instead we'll leave that to the economists.

If you're in the market for some high yielding ASX shares, look no further than our "Secure Your Future with 3 Rock-Solid Dividend Stocks" report. In this free report, we've put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

 

More reading

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »