Australian homeowners are unlikely to receive the Christmas gift they desire from the Reserve Bank of Australia (RBA), as interest rates are expected to remain unchanged. However, some economists predict that when the RBA lowers interest rates in February next year, the reduction may be larger than anticipated.

According to the Consumer Price Index data released by the U.S. Department of Labor on October 10th, the country's inflation rate in September was 2.4%, dropping to the lowest point in three years, although this figure is higher than the 2.3% predicted by economists. While the U.S. inflation rate has sparked discussions about interest rate cuts in Australia, independent economist Saul Eslake told News Corp Australia that the RBA is unlikely to follow the footsteps of the Federal Reserve in lowering interest rates.

"The central bank will make decisions based on what it believes will happen in Australia, rather than imitating the Federal Reserve. For decades, the RBA has not really followed the Federal Reserve's lead."

Currently, mortgage holders under pressure hope that Australia can follow the U.S. in lowering interest rates. However, Eslake predicts that the RBA may wait until the economic data for December is released before making a decision.

"I believe the first interest rate cut will come in February, and it may be a reduction of 50 basis points at once."

Advertisement

"One of the reasons is that the Federal Reserve has taken similar measures, and another part of the reason is that the previous four interest rate hikes in Australia were all by 50 basis points.""This is a strong way to signal that the focus is shifting. Once the Reserve Bank of Australia (RBA) is confident that inflation has returned to the target range, it can declare victory in the battle against inflation to the economy, businesses, and households, and now the focus will shift to preventing any unnecessary rise in unemployment or economic weakness."

Although this is a larger interest rate cut than the market expected, Eslake said it might just be a matter of timing.

"The market expects a 25 basis point cut in both December and February, but I think they will do it all at once."

Although it is unlikely that the RBA will lower the cash rate at the November meeting, there is still a glimmer of hope for Australian consumers.

If the Federal Reserve continues to initiate rate cuts starting in September, and the RBA keeps rates unchanged, the Australian dollar may strengthen.

Eslake said: "This would help reduce the cost of living, making imported goods cheaper, and the impact on exporters could also be somewhat mitigated.""Although the impact is not significant, the Reserve Bank of Australia (RBA) would consider it helpful. This is part of the tightening of financial conditions."

"The RBA believes that if their approach to interest rates differs from that of the Federal Reserve, it could lead to an appreciation of the Australian dollar."