Federal Reserve cuts U.S. interest rates: Will the RBA do the same next week?

The U.S. Federal Reserve has cut interest rates in the United States, will the Reserve Bank follow suit next week?

| More on:
a woman

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

As was widely expected by economists and investors alike, the Federal Open Market Committee (FOMC) met overnight and cut U.S. interest rates by 25 basis points to the range of 2% to 2.25%.

Federal Reserve chairman, Jerome Powell, explained:

"In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 2 to 2-1/4 percent. This action supports the Committee's view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective are the most likely outcomes, but uncertainties about this outlook remain. As the Committee contemplates the future path of the target range for the federal funds rate, it will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective."

However, Mr Powell disappointed the market at a post-meeting news conference when he explained that the central bank's rate cut was part of an ongoing move to adjust to economic conditions and warned that there was no guarantee of future cuts.

Will the Reserve Bank follow suit next week?

On Tuesday the Reserve Bank of Australia will meet to decide on the cash rate once again.

Whilst most economists agree that another cut is coming in the very near future, the August meeting appears to be a touch too soon for them.

According to the ASX 30 Day Interbank Cash Rate Futures, there is now only a 10% chance of a rate cut at next week's meeting.

As you can see below, the market expects a rate cut to 0.75% in October or November and then a further rate cut to 0.5% around the middle of next year.

Source: ASX

In light of this, I think investors ought to prepare for a long period of low interest rates and consider switching out of savings accounts or term deposits into dividend shares such as Lendlease Group (ASX: LLC), National Storage REIT (ASX: NSR), or Scentre Group (ASX: SCG).

Should you invest $1,000 in Boss Resources Limited right now?

Before you buy Boss Resources Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Boss Resources Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended National Storage REIT and Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why HMC Capital, Platinum, Sigma, and Skycity shares are dropping today

These shares are having a tough session on Tuesday. But why?

Read more »

A close-up photo of a ballot box with an Australian flag in front of it and a gentleman's hands placing his vote in the 2022 election inside the box
Share Market News

How these ASX 200 stocks are primed to gain from Labor's resounding Federal election win

With the Federal election in the rear-view, which ASX 200 stocks should I buy now?

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Share Gainers

Why Dimerix, Evolution Mining, Inghams, and NextDC shares are charging higher today

These shares are rising when many are falling today. But why?

Read more »

Smiling young woman eating chocolate outdoors.
Share Market News

The See's Candies playbook for ASX investors

Two ASX businesses that remind me of Buffett’s sweetest investment.

Read more »

Man smiling at a laptop because of a rising share price.
Opinions

My 2 favourite ASX sectors to invest in

Finding your groove can help your investing success.

Read more »

Legendary share market investing expert and owner of Berkshire Hathaway Warren Buffett
Opinions

3 things I learned from Warren Buffett being the CEO of Berkshire Hathaway

The Oracle from Omaha is in his last year as CEO.

Read more »

A male ASX 200 broker wearing a blue shirt and black tie holds one hand to his chin with the other arm crossed across his body as he watches stock prices on a digital screen while deep in thought
Share Market News

5 things to watch on the ASX 200 on Tuesday

Here's what to expect on the local market today.

Read more »

A neon sign says 'Top Ten'.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a rough trading day for ASX stocks this Monday.

Read more »