The Fed slashes rates – will the RBA follow suit?

The Fed Slashes Rates – Will the RBA Follow Suit?

Mark Stevenson, Managing Director at Bell Partners Finance (now Evolve Lending & Finance), was featured in Broker Daily in September 2024 following the US Federal Reserve’s decision to cut rates by a larger-than-expected 50 basis points, with commentary on what the move meant for Australian mortgage holders watching the Reserve Bank’s next steps.

The Federal Open Market Committee cut to a range of 4.75 to 5 per cent, citing progress toward its inflation target and a softening labour market. The scale of the cut surprised many observers, and it immediately raised questions across the industry about whether it would influence the RBA’s thinking as the Australian central bank continued to hold the cash rate at 4.35%.

Mark’s view was direct: Melbourne Cup Day in November was shaping as the best bet for a long-awaited reduction. He pointed to the RBA’s own Cup Day pattern as context, noting that the central bank had lifted rates on Melbourne Cup Day in both 2022 and 2023, and had famously cut rates on Cup Day in 2020 during the pandemic. With inflationary pressures easing and the board having discussed but ultimately ruled out a hike at its August meeting, Mark’s read was that if the RBA was going to move, cutting rather than hiking was the more likely direction.

The RBA governor had been emphatic in the preceding weeks that a cut was not on the agenda in the near term, but Mark’s broader point held: borrowers who had been waiting for rate relief were seeing global conditions shift in their favour, and the direction of travel, even if delayed, was becoming clearer.

If you are keeping an eye on rate movements and want to understand what they mean for your home loan, contact Evolve Lending & Finance for a review of your current arrangements.