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Cash-strapped mortgage holders are expected to receive some relief today, with financial markets predicting the Reserve Bank of Australia will cut the official cash rate.
The RBA board will announce its decision on interest rates at 2.30pm today, after weeks of commentary by economists.
Financial markets are predicting a 90 per cent chance of a 25 basis points today that would bring the cash rate back to 4.1 per cent.
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The cash rate has been on hold at 4.35 per cent for 15 months after a cycle of 13 hikes by the RBA.
Experts argue that the fall in inflation within the RBA target range gives its board room to slash the official cash rate. If there is a cut, mortgage holders must then wait and see whether their banks will pass on that decision.
Modelling from financial comparison site Mozo shows that lowering the cash rate could save people with an average mortgage of $665,000 about $104 a month on their repayments.
But economist Richard Holden told 9News an interest rate cut will take time to flow into household budgets.
"It still takes sometimes between four and six weeks for people to see that actually affecting the mortgage payment that they need to make," Holden said.
Hopes of a rates cut have been buoyed by the release of consumer price index data for the December quarter, last month which showed headline inflation falling to 2.4 per cent and the RBA's preferred underlying measure dropping to 3.2 per cent.
Experts argue that the fall in inflation within the RBA target range gives its board room to slash the official cash rate. If there is a cut, mortgage holders must then wait and see whether their banks will pass on that decision.
The RBA decision will also be scrutinised by the federal government as Prime Minister Anthony Albanese weighs when to call an election.
He must call it by May, and an interest rate cut would go some way to reinforcing his Labor government's credentials om managing the economy.
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