Two key figures for the RBA to cut rates revealed ahead of November meeting

Cash-strapped mortgage holders will be watching closely as the Reserve Bank prepares to announce its latest rate decision, with two key figures likely to determine when homeowners will get some much needed cash relief.

The RBA monetary policy board meets on Melbourne Cup Day, with 30 out of 36 experts surveyed by Finder expecting interest rates will be left on hold.

If the 86 per cent of economists are correct, Australia’s official cash rate will remain at 3.6 per cent.

The other six economists are predicting interest rates will be cut at 2.30pm on Tuesday to spur on the economy and to protect against a weakening labour market.

Australia's Cash Rate 2022;

AMP economist My Bui said two numbers were key in determining when the next cut occurs - and they strongly suggest it’s not any time soon.

”We are definitely not going to get a cut in 2025 because inflation is too high,” she told NewsWire.

“The next time the RBA could cut interest rates is if we get a quarterly inflation number of 0.7 per cent, that is pretty comfortable for them to cut.

“It also depends on where the labour market goes from here.”

Ms Bui said the other number to watch was the unemployment rate. If it rose from 4.5 per cent to around 4.7 per cent, this would likely prompt the RBA to move on rates.

October’s labour force figures, due on November 13, are forecast to show unemployment improving slightly to 4.4 per cent.

”If the unemployment rate slows down to 4.7 or 4.8 per cent then the RBA definitely has room to cut,” Ms Bui said.

Market expectations on rates changed dramatically throughout October. When unemployment jumped back above 4.5 per cent for the first time in four years, the bond market put more than an 80 per cent chance on a November interest rate cut.

That shifted two weeks later, when RBA’s all important trimmed mean inflation rate came in at 1.0 per cent in the September quarter, beating expectations of 0.8 per cent.

Fears of the RBA’s next move being a rate hike increased, and talk of a cut quickly ceased.

It’s not all bad news though.

According to AMP, there will be two further interest rate cuts by the end of the financial year.

Oxford Economics Australia head of economic research and global trade Harry Murphy Cruise said the RBA was stuck between a rock and hard place on inflation and jobs, but should avoid the worst-case scenario, where inflation is still too high and unemployment is still rising.

“I think the RBA will avoid that as it has a little bit more time up its sleeve to address those concerns but ultimately if the central bank isn’t able to tame inflation at the same time unemployment continues to rise then we could be in that period.”

Despite rates staying higher for longer, Ms Bui said the economy was looking “pretty good” and an extended pause is “normal”.

“Holding rates are pretty similar to other countries. For example, in the United States, the central bank paused last year from December until September,” Ms Bui said.

“Most central banks don’t cut every meeting or every quarter but instead remain data dependent.”