Buying ASX shares and waiting for a Reserve Bank of Australia (RBA) interest rate cut?
You're not alone!
As you're likely aware, yesterday the RBA kept the official Aussie interest rate on hold at 4.35%. That's right at its 2024 peak. And it matches the highest rate levels investors have had to contend with since 2011.
While that move was widely expected, ASX investors still breathed a noticeable sigh of relief, since the central bank has already hiked the cash rate three times this year to combat resurgent inflation.
Indeed, at 2:30pm AEST on Tuesday, directly before the RBA's announcement, the S&P/ASX 200 Index (ASX: XJO) was down 0.3%.
Following the central bank's decision to hold rates at the current level for now, the ASX 200 jumped back into the green to finish the day up a slender 0.04%.
But while the pause was welcomed, ASX investors and mortgage holders alike are really waiting for those first cuts.
Image source: Getty Images
When might we see RBA interest rate easing?
Rather than flagging lower interest rates, RBA governor Michele Bullock left the door open to potential rate hikes over the coming months.
"Today's decision does not rule out further tightening in monetary policy if that is what is required to bring inflation down," Bullock said following yesterday's announcement.
But Barrenjoey chief rates strategist Andrew Lilley believes further rate increases are looking less likely.
"The market is increasing its confidence that the RBA is done raising rates," Lilley said (quoted by The Australian Financial Review). "Because the RBA's language was seen as very non-committal, the markets only sees a 50% chance of any more rate hikes at all this year."
Josh Gilbert, lead analyst for APAC at eToro, added:
The RBA has finally hit pause in 2026 after three consecutive rate hikes since February. The signal is clear: the central bank is taking the time to step back and assess, rather than keep its foot to the floor…
My view is that the chance of further tightening looks unlikely right now. With three hikes already in the books and the Middle East conflict seemingly winding down, most of the heavy lifting may already be done.
Ebury economist, Anthony Malouf, echoed this sentiment.
"We continue to expect the RBA to keep the cash rate at 4.35% for the remainder of 2026 and into early 2027 as the board looks to balance the risks of weaker growth and elevated inflation," Malouf said.
So when might we see the RBA cut interest rates?
ANZ Group Holdings Ltd (ASX: ANZ) head of Australian economics Adam Boyton expects that the RBA interest rate likely won't top the current 4.35% in this cycle, with rate cuts potentially coming in the second half of 2027.
According to Boyton:
Looking further ahead, with broader signs of an economic slowdown and interest rates restrictive, rate cuts are likely to be the next sequence of rate moves. We have pencilled these in for the second half of 2027 – August and November – with the RBA likely to proceed down that path cautiously.
Commonwealth Bank of Australia (ASX: CBA) economists also expect the central bank to keep current cash rate settings into 2027.
CBA believes ASX investors might then see the first RBA interest rate cut in May 2027.
