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

three young children weariing business suits, helmets and old fashioned aviator goggles wear aeroplane wings on their backs and jump with one arm outstretched into the air in an arid, sandy landscape.
Share Market News

3 ASX All Ordinaries shares rocking new 52-week highs on Wednesday

Which All Ords shares have recorded new 12-month highs today?

Read more »

share price high, all time record, record share price, highest, price rise, increase, up,
Share Market News

Here are the top 10 ASX 200 shares today

These 10 ASX 200 shares outperformed all others on Wednesday.

Read more »

a group of three people carry a large block to line it up in ascending order with two other blocks nearby.
Share Market News

Here are the 3 most heavily traded ASX 200 shares on Wednesday

Our most traded ASX 200 share today is up 10%.

Read more »

A man in his office leans back in his chair with his hands behind his head looking out his window at the city, sitting back and relaxed, confident in his ASX share investments for the long term.
Share Market News

ASX investors are still feeling confident. Here’s why

ASX investors are still confident in the markets. Here's why...

Read more »

a man in a business shirt, tie and suit holds a mobile phone to his ear while he drinks a large glass of milk.
Share Market News

A2 Milk share price on watch amid FDA update

Here's what the FDA said...

Read more »

A man in a suit smiles at the yellow piggy bank he holds in his hand.
Share Market News

Is the NAB share price a buy following the bank’s latest update?

Are NAB's shares in the buy zone after its update?

Read more »

Business woman watching stocks and trends while thinking
Share Market News

5 things to watch on the ASX 200 on Wednesday

Another big day is expected for the ASX 200 on Wednesday...

Read more »

A woman lies back and relaxes in her boat with a big smile on her face as it floats on the rising tide.
Share Market News

Why the Charter Hall Long WALE REIT share price isn’t rocking the boat

It's steady as she goes for this ASX real estate investment trust.

Read more »