There weren’t many punters betting on a rate cut on Melbourne Cup Day, with financial markets allocating only a 5% chance the RBA would reduce the cash rate by twenty-five basis points.
It was only a few months ago when some forecasters were still expecting a November cut, but the data simply hasn’t been compelling enough to bring rates down just yet.
At the very least, the decision to hold interest rates at 4.35% should provide a further boost to household confidence, along with clear signs that inflation is moving in the right direction and the next move is likely to be down, albeit with some uncertainty around the timing of cuts. A further rise in sentiment is a positive for housing, but we aren’t likely to see stronger housing outcomes until borrowing capacities improve and barriers to mortgage serviceability assessments are reduced.