The markets are pricing in some optimism.

The Reserve Bank of Australia (RBA) announced its decision to keep the cash rate on hold at 4.35%. The decision follows weaker-than-expected GDP figures released last week, which have intensified speculation about the RBA’s future policy direction. Read on to see what markets are predicting for February. 

For now, this steady decision brings a sigh of relief to many.

Shane Petros, CEO of Australian Finance Hub, observed, “The RBA’s decision to hold the cash rate is a positive sign for everyday Australians, offering stability. Looking ahead to 2025, we’re likely to see steady growth in the property market as buyers regain confidence and activity picks up, particularly in entry-level and family housing. However, with affordability still stretched for many, the focus will remain on creative solutions, such as smarter lending options and leveraging government incentives, to help Australians get into the market or build on their investments, making the right financial advice more crucial than ever.”

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But there’s a twist…

A spokesperson from TorFX commented, “While the RBA was forecast to leave interest rates on hold again this month, in light of last week’s weaker-than-expected GDP figures, the bank’s forward guidance will be closely watched by AUD investors. Investors will be eager to determine whether the central bank remains confident in its hawkish stance or if it could be inclined to bring forward the start of its next cutting cycle to counter mounting economic pressures.”

“Any dovish signals from the bank that support bets for an April rate cut could trigger notable volatility in the Australian dollar.” 

Which begs the question: when will that first cut happen?

Chris Weston from Pepperstone confirmed that while markets only predicted a 7% chance of a rate cut today, there is now an 87% chance of a cut in February*. This highlights growing anticipation for monetary easing as the economy contends with slow growth and subdued consumer spending.

As markets digest the decision, all eyes are on the RBA’s outlook for 2024, with many awaiting more confirmation on the next move.

*updated at 3.04pm Tuesday 10 December