Will the RBA increase rates today?

Is the RBA going to increase rates again on Monday?

| More on:
Red percentage sign on blocks on top of each other, symbolising interest rates.

Image source: Getty Images

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

This afternoon, the Reserve Bank of Australia (RBA) will be meeting to discuss the cash rate once again.

The previous two meetings have seen the central bank raise rates by 0.5% on each occasion. Will the same happen again this time?

Will the RBA raise rates today?

The good news for savers and the bad news for borrowers is that the market is expecting the RBA to raise rates again on Tuesday.

According to the latest cash rate futures, the market is pricing in a 67% probability of an increase from 1.35% to 2%.

However, the more likely outcome according to economists will be a third consecutive 0.5% increase to 1.85%.

The economics team at Westpac Banking Corp (ASX: WBC) are among those forecasting a 0.5% increase this afternoon.

Westpac's chief economist, Bill Evans, explained last week that he doesn't expect this to be the final time the central bank lifts rates by this amount. He said:

For August, the Governor will continue to make the case for justifying a third consecutive 0.5% move therefore laying the foundation for the expected [0.5%] move in September.

After which, Evans is expecting rates to continue to rise but in smaller increments. He explained:

Just as we saw Chairman Powell, during the post FOMC Press Conference this week, imply that having reached the neutral zone (around 2.5%) with the federal funds rate (now 2.375%) it would be appropriate to slow the pace of tightening, we expect that following the 0.5% increase in September the RBA Board will move back to 0.25% increments from October as policy moves into the contractionary zone.

All in all, the bank expects this to eventually lead to the RBA maintaining the cash rate at 3.35% throughout 2023.

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. 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

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

The ASX was back to the races this Tuesday.

Read more »

A young woman sits with her hand to her chin staring off to the side thinking about her investments.
Opinions

Could Soul Patts shares hit $50 in 2025?

This company jumped more than 16% yesterday.

Read more »

Stethoscope with a piggy bank in the middle.
Broker Notes

Australian health insurance: Does Macquarie prefer Medibank or NIB shares?

Medibank and NIB shares have both surged in 2025. Here’s what Macquarie expects now.

Read more »

A woman reaches her arms to the sky as a plane flies overhead at sunset.
Travel Shares

Why the Qantas share price soared 20% in May to new all-time highs

With another stellar month in May, Qantas shares are up more than 79% in a year.

Read more »

Man smiling at a laptop because of a rising share price.
Broker Notes

9 ASX 200 shares just upgraded to strong buy ratings

Brokers have upgraded these shares amid expectations of price growth over the next 12 months.

Read more »

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

Why DroneShield, Judo, Pepper Money, and Strickland shares are surging today

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

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Share Fallers

Why Elders, IDP Education, Life360, and Pilbara Minerals shares are falling today

Let's see why investors are selling these shares.

Read more »

Red sell button on an Apple keyboard.
Broker Notes

Sell alert! Brokers say pull the plug on these 3 ASX 200 shares

Experts say it's time to press the sell button on these ASX 200 shares. Find out why.

Read more »