Future rates cuts not ‘a done deal' after Reserve Bank of Australia's July meeting, Judo Bank's Warren Hogan predicts
Money markets are pricing in a 95 per cent chance of the central bank cutting rates on Tuesday to bring the cash rate down to 3.6 per cent.
The rate cut comes as trimmed mean inflation – the RBA's preferred measure, which examines the middle 70 per cent of price changes – has fallen well within the central bank's target band.
While a rate cut on Tuesday is all but locked in, there is no guarantee the RBA will continue cutting, Judo Bank's chief economist Warren Hogan has warned.
'There's still a lot of uncertainty out there,' Mr Hogan said.
'The RBA was very worried about what tariffs will do to the economy and the risk they pose.
'Although that hasn't gone away, we know markets have moved on and are now at record highs … and property markets here are at record highs.
'I think the RBA has got to be very careful once they get policy down to about three and a half (per cent) after the cut this week.
'After that, I don't think it's a done deal we get more rate cuts despite market prices.'
If the RBA cuts rates on Tuesday, it will be the first series of consecutive cuts since the central bank delivered emergency financial relief in March 2020.
However, another cut after the July call is not set in stone as the RBA looks towards setting a terminal rate, Mr Hogan said.
'I don't think August is a slam dunk as the market expects tomorrow to be,' he said.
'The real risk tomorrow is obviously a less concerned RBA and, of course, the big risk is they don't move at all.
'I think that's pretty unlikely because I think they're happy to get that cash rate down to what they're thinking is neutral - about three and a half (per cent).'
Every major bank is now predicting the RBA will cut rates on Tuesday.
ANZ was holding out on a prediction of no cut until August, but changed last week amid data showing retail sales continued to be soft.
Research from Money.com.au said households with a $1m home loan will save more than $450 each month compared to the beginning of the year if the Reserve Bank of Australia delivers another rate cut on Tuesday.
A household with a $600,000 home loan will save $273 per month, while those with an $800,000 loan will save $364.
The array of cuts for Aussie households follows the RBA holding the cash rate at 4.35 per cent for almost a year and a half to stamp out post-pandemic inflation.
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