Retirees and savers are being warned to brace themselves for lower incomes as the Reserve Bank of Australia (RBA) considers cutting interest rates in May 2025. This potential cut, the second in the calendar year will be welcome news for mortgage holders but a hit for those relying on savings.

Impact on Retirees and Savers

Australians currently have a staggering $1.571 trillion in household deposits with banks. If the RBA cuts interest rates, the returns on these deposits will decrease as banks are likely to pass on the cuts to both mortgage holders and savers.  

Potential Rate Cut in May 2025

The RBA board is set to meet on May 19-20, 2025, with several economists predicting a 0.25% cut in the cash rate. This would bring the cash rate down to 3.85%. Some factors in this forecast include easing inflation figures, headwinds from the global environment and the uncertainty surrounding the tariffs.  

Strategies for Savers

As seen during the pandemic, retirees and savers may need to take on more risk to achieve similar returns.  

Conclusion

The potential rate cut in May 2025 poses challenges for retirees and savers, who may need to adjust their investment strategies to maintain their income levels. Evaluating personal financial goals and seeking professional advice can help navigate these changes.

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