When will there be another interest rate cut?

The Reserve Bank cut the cash rate by 0.25% to 3.85% on 20 May with many planning motor vehicle finance wondering when there will be another interest rate cut. The answer to that key question could lie, not in how conditions play out in the domestic economic, but in what happens internationally, especially with the Trump administration’s tariffs. A point mentioned by Reserve Bank of Australia (RBA) Governor Michelle Bullock in the May decision statement and in the press conference following the Board meeting.

The RBA’s May decision was the second rate cut in three months, with all the major banks anticipating the decision. Many lenders were already pricing in a 0.25% May cut after the March inflation figures were released by the ABS. While these figures were higher than some expected, the rate of inflation did fall to within the RBA’s target band of 2-3% for the first time in over 3 years.

While inflation has been the main reason for rate decisions by the Reserve Bank (RBA) over the past few years, the main focus appears to be shifting to what is happening overseas. We provide an overview of rationale for the RBA Board’s latest decision and the indicators for further cuts in the coming months.

RBA Interest Rate Cut Announcement

In announcing the May cash rate decision, Governor Michelle Bullock said that with headline inflation at 2.4%, below target for the first time since 2021, rate decisions were seen to be working.  Ms Bullock said that forecasts by RBA staff were for that rate to rise in the coming year as temporary support measures were unwound.

A major focus of the Board’s statement was on the uncertainty of the outlook as a result of international trade and tariff issues. In the press conference following the announcement, Ms Bullock said the tariff scenario had been a roller coaster. Considerable uncertainty is seen about how countries will respond to the US tariff decisions and the this was expected to adversely impact economic activity globally.

While this uncertainty is contributing to weaker outlooks for inflation, employment and economic growth in Australia, global policies are changing quickly which is making forecasts also subject to uncertainty. A lag in the effect of rate decisions on prices and wages also contributes to a level of uncertainty.

Maintaining inflation at a stable rate remains the priority for the Board. The positive elements, which the Board describes as ‘upside risks’, are diminishing due to the developments happening internationally. But with the inflation rate expected to stay within the target range, the Board deemed it appropriate to announce a cut in the cash rate.

When the Minutes of the RBA Board meeting are released on 3 June, further insights may be available into the Board’s decision making and possible future decisions.

Prospects for Another Interest Rate Cut

So when will there be another interest rate cut? The RBA Board next meets to make their decision on 7-8 July. But many in the markets are indicating it could be August for a further lowering of interest rates. By how much will be interesting. Reports have the NAB Chief Executive forecasting 3 more cuts coming up. But others are less certain.

The RBA Board typically gives little away as to their plans for future decisions, saying they will be studying the data. In the Quarterly Review, the RBA reiterates many of the comments made in the May Monetary Policy Decision Statement.

In relation to how the bank sees the economy developing, the global uncertainty is central to comments and make the outlook for Australia’s economy slightly weaker as a result of lower growth globally due to the tariff situation. Unemployment is expected to stabilise just below 4.5%, a rate considered historically low. The expectation for inflation is to stabilise within the target 2-3% range.

The global uncertainty factor was further highlighted when days after the Board’s May meeting, the Trump administration said it would impose a 50% tariff on the European Union, which once again resulted in falls on Wall Street – the stock market.

Effect of Interest Rate Cut on Car Finance

For buyers in the market for financing on new vehicles in coming months, especially with the end of financial year sales, they should see a lowering of car finance interest rates. While the focus of publicity post-rate decisions is on how the major banks react with their home loan rates, decisions do flow through other markets, including motor vehicle financing.

With access to more than 80 lenders, we have the capability to constantly achieve highly competitive rates on both personal car loans and business vehicle financing.

All rates are individually offered and based on individual financials and credit profiles.  Buyers can use our Finance Calculator to work up estimates or connect with us for a quick quote.

For competitive car loan rates following the RBA’s interest rate cut, contact Jade Car Loans 1300 000 003 for a quote.

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