Home loan borrowers might want to savour the Reserve Bank of Australia's latest interest rate cut, with many economists tipping it to be the central bank's last trim for some time.
The RBA slashed the cash rate by 0.25 of a percentage point at its monthly board meeting on Tuesday, taking rates to an historic low of two per cent.
The cut was in line with the expectations of the market, which had forecast a 76 per cent chance of a rate cut.
The RBA's decision will mean repayments on a $300,000 mortgage will drop by more than $40 a month if retail banks fully pass on the cut.
ANZ was the first major financial institution to say it would pass on the cut in full, lowering its variable retail home loan rates by 0.25 percentage points from May 8.
In a statement accompanying the RBA's decision, governor Glenn Stevens cited weakness in business capital expenditure in both the mining and non-mining sectors, while noting that the bank was working to contain risks in the housing market.
The Australian dollar initially dipped after the cut but quickly rebounded amid speculation Mr Stevens' statement indicated the bank's easing cycle had ended.
CommSec chief economist Craig James said he believed the RBA was "quietly confident" it had now slashed rates enough, given there were signs of recovery in the economy.
"Provided that the federal budget rebuilds confidence, provided that the domestic economy continues to lift and provided that the global economy brightens, then the Reserve Bank shouldn't need to do more this cycle in stimulating the economy," he said.
ANZ chief economist Warren Hogan said the RBA could hold interest rates at two per cent for some time.
"We doubt that the cash rate will move for another six months, if not longer," he said.
The rate cut comes after the RBA surprised financial markets with a similar reduction in February.
The central bank kept rates on hold in March and April, causing the futures market to price in expectations for another cut this month.
But that forecast changed after a surprise fall in the unemployment rate, and was complicated by a moderation in house prices and a rebound in iron ore prices.
The RBA's statement indicated further rate cuts were unlikely, NAB chief markets economist Ivan Colhoun said, pointing to the phrase "recent encouraging trends in household demand".
Mr Colhoun said the statement suggested "a relatively high hurdle for a further easing in the near term".
But Citi economists Paul Brennan and Josh Williamson believe the RBA could cut its cash rate again as soon as August.
"We suspect the RBA then will likely face the same issues it is grappling with now; still below trend economic growth and low inflation, which would see the bank reluctantly cut again to 1.75 per cent," they wrote in a note to clients.
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