Significant Rate Cut Now Unlikely

The likelihood of a significant double rate cut has sharply decreased, according to bond traders, as signs of easing tensions between China and the United States emerge after a month of intense tariff exchanges.

Markets now anticipate the Reserve Bank of Australia (RBA) to lower the cash rate by a quarter of a percentage point, with only a 10% chance of a 50-basis point cut, down from about 40 percent last week.

The recent trade war between China and the US had led markets to expect substantial rate cuts to bolster economic confidence. However, the situation has evolved with US President Donald Trump imposing a 145 percent tariff in China, which responded with a similar rate on American imports.  

Despite some conciliatory comments from Trump, the Chinese government remains cautious, describing the notion of ongoing discussions as "groundless as trying to catch the wind."

The RBA's next meeting on May 20 is expected to result in a quarter-point easing to support investor confidence. However, the central bank will closely examine crucial inflation data due on April 30. Economists predict that the annual pace of underlying inflation will fall below 3 percent, marking its first return to the RBA's target range of 2 to 3 percent since 2021. Inflation had surged to nearly 7 percent post-pandemic.

We are starting to see lenders offering more competitive rates and cash back payments to entice new clients and with this people are finding good interest savings.

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