So, what does the RBA consider when setting its cash rate target, and what do the big four banks think lies ahead?

What are the banks predicting?

NAB is projecting five rate cuts.

Independent financial comparison site Canstar has estimated that a reduction in monthly repayments from one cut could be up to $92 on a $600,000 loan with 25 years remaining on the term.

How much could Australians save?

If just two rate cuts occur, the same borrower will save $182 each month.

NAB is expecting the greatest relief for borrowers with five cuts compared to ANZ’s forecast for only two cuts.

A rate cut is increasingly likely this February, but Canstar data insights director Sally Tindall said to “prepare for any possibility”.

There are several measures that influence RBA decision-making, including inflation and unemployment.

Looking to inflation and employment rates

The Australian Bureau of Statistics reported CPI at 2.3 per cent in the 12 months leading to November, within the RBA’s target of 2 to 3 per cent.

“If core inflation continues along the same trajectory as we saw in the more volatile monthly dataset, then we could well see a rate cut.”