ASX Rises Ahead of RBA Decision on Third Interest Rate Cut

The Australian sharemarket edged higher on Tuesday morning as investors brace for the Reserve Bank of Australia’s (RBA) latest interest rate cut decision, with most analysts tipping rates will remain on hold.

The benchmark ASX 200 was up 0.2% in early trade, driven by gains in the energy and banking sectors. Oil prices jumped overnight, lifting local energy stocks, while the big four banks saw modest rises as markets digested economic signals ahead of the central bank’s announcement.

RBA Expected to Hold Steady and Deliver Third Interest Rate Cut

All eyes are on the RBA’s July meeting, with economists broadly expecting the cash rate to stay at 4.35% for a fifth consecutive time. Inflation remains stubbornly above the RBA’s 2–3% target range, and Governor Michele Bullock has warned that further hikes remain a possibility if inflation doesn’t ease as expected.

Still, recent data pointing to slowing consumer spending and subdued wage growth suggests the RBA may continue its wait-and-see approach — at least for now.

Investor Sentiment Cautious

Markets have priced in a low chance of a rate rise this month, but there’s growing uncertainty about the months ahead. Some analysts are now flagging the possibility of another hike later in the year if inflation proves sticky, particularly with household services and rent still driving prices higher.

“We’re expecting the RBA to hold, but their tone will be key. Any hint of a hike later this year could rattle markets,” said one analyst.

Global Cues Mixed

On Wall Street, US markets were closed for the Independence Day long weekend, leaving local investors without a strong overseas lead. However, recent data from the US pointing to a cooling labour market has fuelled speculation that the Federal Reserve may cut rates later this year — a move that could ease pressure on central banks globally.

The Week Ahead

Beyond the RBA, traders will be watching upcoming inflation and employment data closely for clues on where the economy is heading. Earnings season is also ramping up, with several major Australian companies set to report results in the coming weeks.