Summary:
The US Federal Reserve tempered market expectations for aggressive rate cuts, delivering a modest quarter-point reduction to a target range of 4.00%–4.25%. While this move was widely anticipated, the Fed’s updated dot plot revealed only two additional cuts for 2025 and one in 2026—far fewer than the 1.5 percentage points of easing previously priced in by markets. Chairman Jerome Powell emphasised a cautious, “meeting-by-meeting” approach, framing the cut as a risk management measure rather than a signal of a broader easing cycle.
Markets reacted swiftly. US Treasury yields rose modestly, with the two-year yield up 4 basis points to 3.55% and the 10-year yield climbing 6 basis points to 4.09%. The US dollar rebounded, lifting the dollar index by 0.3% to 97.17, which in turn dragged the Australian dollar down 0.5% to US66.23¢ after it had touched an 11-month high. Wall Street closed lower, and gold briefly hit a record $US3,707.57 before retreating.
Cash rate expectations show a steady decline from 3.6% to below 3.00% by September 2026. This week, the cash rate and short-term yields held steady, while long-term bond yields eased modestly. Savings account rates vary widely, with online banks offering up to 5.00%, while traditional accounts lag. Market sentiment remains cautious, with limited upward pressure on interest rates.
Reserve Bank of Australia is forecast to lower its cash rate from 3.6% to 3.35% this year, supported by inflation returning to target and a weaker-than-expected August jobs report showing a 5,400 decline in employment. Bond markets now imply a 75% chance of a rate cut at the RBA’s November meeting.
Figure 1: Market Expectation on Cash Rate
CASH ACCOUNT
Product Interest
Rate p.a.Notes AMP Saver Account 4.45% To earn the bonus rate, you must grow your account balance by at least $250 (excluding interest earned) by the end of each calendar month. Applies to balances up to $500,000. ANZ Premium 0.05% $10,000 - $249,999 ANZ Progress Saver 3.40% To earn the bonus rate, you must deposit at least $10 in one transaction and not make any withdrawals or transfers during the month.Applies to balances up to $500,000 Arab Bank Online Savings 4.55% No minimum deposit or monthly conditions to earn interest.Applies to balances up to $499,999 for the higher rate Bankwest Hero Saver 4.00% Variable Hero rate on eligible balances up to $250,000.99. CBA NetBank Saver 4.45% 4.45% p.a. for the first 5 months (includes a 2.90% p.a. fixed bonus margin above the standard variable rate of 1.55% p.a. CBA Goal Saver Account 4.25% 4.25% p.a. when you grow your balance each calendar month (excluding interest and transactions initiated by the bank) Heritage Online Saver 4.00% get a 4 month Bonus Intro Rate* available for new members on balances up to $100,000. ING Savings Accelerator 4.70% To earn the bonus rate, you must deposit at least $1,000 into a personal ING account, make 5 eligible transactions with a linked Orange Everyday account, and grow the balance each month Macquarie CMA 2.25% Interest rates vary based on account balance tiers.applies $10,000,000 and above: ME Online Savings 3.60% Bonus interest applies to balances up to $250,000. NAB iSaver 4.40% for the first 4 months (includes a 3.15% p.a. fixed bonus margin above the standard variable rate of 1.25% p.a.Available to new customers or those who haven't held a NAB iSaver in the last 12 months. NAB Reward Saver 4.10% includes a 0.10% p.a. variable base rate and a 4.00% p.a. variable bonus rate).To earn the bonus rate, you must make at least one deposit on or before the second last banking day and no withdrawals. Rabobank PremiumSaver 4.65% On balances to $250,000. Balance increased by $200 a month. RAMS Saver Account 1.30% On balances to $500,000. Minimum $200 deposit each month with no withdrawals. Suncorp Growth Saver 4.30% Earn 4.30% p.a. Growth Saver bonus interest each month you grow your net balance by $200 or more (excluding interest) and make no more than one withdrawal. ubank Save Account 5.00% All you need to do is have a Spend account and deposit $500+ per month into any Spend, Bills, or Save accounts (not including internal transfers) to get the bonus interest rate. Easy. Up Savers Account 4.30% To earn the bonus rate, you must deposit at least $200 each month and make no withdrawals. Westpac eSaver 4.25% Fixed rate for the first 5 months for new eSaver customers.