Most economists agree the Reserve Bank of Australia (RBA) will keep interest rates on hold when it hands down its decision on the official cash rate on Tuesday afternoon.
The interest rate the central bank charges lenders to borrow money is 4.35 per cent, as it has been all year.
But concerns have been raised about whether falls in Australian and overseas stock markets will influence the bank's decision. The Australian stock exchange had its worst day since the beginning of the COVID-19 pandemic, falling about 5.7 per cent from last week's record highs.
It came off the back of major falls in Japan and the US, as jobs and manufacturing data from the US were much weaker than expected on Friday and tech shares fell from astronomical highs.
RSM economist Devika Shivadekar told SBS News: "Certainly the RBA board would be looking at how this unravels very closely and, in all likelihood, Governor (Michele) Bullock will touch upon the RBA's thinking around this rout at her press conference later today."
However, she said she still believed the RBA would hold steady today and keep rates on hold.
AMP Capital chief economist Shane Oliver told SBS News the RBA looks at longer term forecasting and doesn't jump every time markets rise and fall.
"It's a bit too early to do anything in response to it, but obviously they're keeping an eye on it that things get a lot worse. So I don't see them adjusting rates this quickly."
He said a rate cut is looking likely in February and possibly sooner, due to concerns about global growth slowing, and demand eventually slowing for Australia's commodities.
IG Market analyst Tony Sycamore was more optimistic saying a rate cut could come by December.
He said the impact of falling share markets won't "hit Main Street".
"I don't think (the RBA) will be particularly concerned with what's happening with the ASX.
"Inflation is slowing, which is what they want, and I think we're going to get rate cuts, which is what everybody wants."
What will influence the RBA's decision on interest rates?
led to speculation the bank could raise interest rates, because unemployment went up while more jobs were created than expected and
However was soft enough to allay fears the bank would choose to raise rates again to force people to stop spending.
The annual rate of headline inflation accelerated in June — rising to 3.8 per cent, up from 3.6 per cent — but the all-important trimmed mean gauge came in a little below expectations, allaying fears underlying inflation was gathering pace.
The trimmed mean provides a measure of inflation that is not excessively affected by large price changes in individual items and is considered a more realistic measurement.
Australia's central bank typically takes into account movements by its counterparts in the US and UK, so news of a potential recession in the US makes it more likely Australia won't increase rates, economists say.
US jobs and manufacturing data was weaker than expected as unemployment climbed to a nearly three-year high, leading analysts to predict the US Federal Reserve could cut rates.
Australia's four biggest banks — ANZ, Westpac, NAB and Commonwealth Bank — all predict a rate cut won't come before November.
This year, despite no cash rate change, 39 lenders have increased variable rates and 21 lenders have increased fixed rates.
Finance expert at the Canstar comparison website, Steve Mickenbecker, said even one cash rate cut wouldn't be enough to steer stressed borrowers clear of danger.
What are economists saying about interest rates?
Twenty-two of the 33 economists surveyed by Reuters expected no change in the key rate before the end of the year, with 10 forecasting at least one 25-basis-point cut in 2024.
One was predicting another hike.
All but one economist surveyed believed there would be no change in the cash rate on Tuesday.
The central bank would be unlikely to gesture towards cuts in its post-meeting press conference and statement, Commonwealth Bank economist Gareth Aird said.
The "neutral bias" — nothing ruled in nor out — would likely be maintained with the board aiming to keep its options open for now, he said.
HSBC chief economist Paul Bloxham expects the RBA will keep rates on hold for the rest of the year, even with other advanced economies cutting rates or signalling such intentions.
The RBA started hiking rates later than other central banks, lifted less than its peers and was dealing with weaker productivity growth, the economist said.
With additional reporting by AAP.
