Tomorrow marks a critical moment for Australian investors as the Reserve Bank of Australia (RBA) is set to announce its next interest rate decision. With market speculation running high, will ASX 200 investors see the long-awaited rate cut, or will the RBA hold steady?

A 90% Chance—But Is It Guaranteed?

According to the RBA Rate Indicator, as of Friday, 14 February, the probability of a rate cut stands at 90%, slightly down from 95% on 11 February. Investor confidence is clearly strong, but does that necessarily mean a rate reduction is imminent?

Since November 2023, the official cash rate has remained at 4.35%, marking the highest level since December 2011 as the central bank has worked to curb inflation. The last time investors enjoyed a rate cut was in November 2020, when rates dropped to a historic low of 0.10%. However, with core inflation easing to 3.2% in the December quarter, some analysts believe the RBA may finally be ready to loosen its grip.

What Do the Experts Think?

Market experts are divided on whether the RBA will move forward with a cut or hold off until more economic clarity emerges.

Rob Talevski, CEO of Webull Securities Australia, warns that while a rate cut is widely expected, uncertainties surrounding global markets—particularly US policy shifts and economic struggles in China—could prompt the RBA to delay its decision until March.

Josh Gilbert, a market analyst at eToro, echoes this sentiment. “The numbers certainly support a rate cut, but the RBA is known for its caution. Governor Michelle Bullock has not provided any strong signals ahead of this meeting, so a pause remains a possibility.”

Jonathan Kearns, Chief Economist at Challenger, acknowledges the credibility of both arguments. “It’s a more balanced call than the market’s 90% probability suggests,” he notes, highlighting the ongoing economic uncertainty.

Paul Bloxham, Chief Economist at HSBC Australia, suggests that if the RBA does cut rates, it may take a ‘hawkish’ stance—indicating that further reductions won’t be rushed.

Meanwhile, Jo Masters, Chief Economist at Barrenjoey, believes market optimism may be misplaced, placing the likelihood of a February cut at just 50%. “The CPI data has opened the door, but this remains a rapidly shifting situation,” she explains.

What Happens Next?

A rate cut would provide relief for borrowers and potentially drive ASX 200 stocks higher, but it could also weaken the Australian dollar, making imports more expensive and potentially reigniting inflationary pressures. If the RBA holds off, however, the market reaction could be swift and negative, sending the ASX 200 lower mid-session.

With the RBA set to announce its decision at 2:30 PM AEDT on Tuesday, investors should prepare for volatility regardless of the outcome.

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