Bank also offers outlook on inflation, housing prices, consumer confidence, and other economies
Despite speculation that the Reserve Bank of Australia (RBA) might raise the official cash rate at its August meeting, ANZ has forecasted that rates will remain unchanged until February 2025, when it predicts a rate cut.
The bank noted that while the Reserve Bank kept the cash rate on hold at 4.35% at its June meeting, the post-meeting statement was slightly more hawkish, with the RBA board stating that they are willing to “do what is necessary” to return inflation to target and will remain vigilant to upside risks in inflation.
“Following the stronger than expected monthly inflation print for May, there has been
some talk about the possibility of a hike at the RBA’s August meeting,” ANZ said in its report, authored by economists Sophia Angala, Madeline Dunk and Catherine Birch (pictured above from left to right).
“Indeed, the June meeting minutes confirmed a hike was considered. While we cannot rule out a hike, we continue to expect rates to stay on hold until the first 25-basis-point cut in February 2025.”
ANZ initially expected the RBA rate cut to happen in November 2024, but revised its forecast last month as stronger-than-expected Q1 CPI suggested that the RBA may not be confident that inflation will return to its target range by the November meeting.
“May monthly CPI surprised to the upside, rising to a six-month high of 4% year-on-year from 3.6% year-on-year in April,” ANZ said. “The RBA will be paying close attention to the Q2 inflation data (due 31 July) as it captures price movements across the entire basket. We expect both headline and trimmed mean inflation to exceed the RBA’s forecast of 3.8% year-on-year in Q2.”
ANZ also predicts a slight GDP growth increase in the second half of 2024, with a return to trend growth by the end of 2025.
The bank also noted that while retail sales data for May exceeded expectations, consumer confidence remained low, with ANZ-Roy Morgan Consumer Confidence weak. However, cost-of-living relief and Stage 3 tax cuts in the second half of the year may boost household disposable incomes.
Housing prices have increased by 3.7% so far in 2024, with ANZ projecting a 6% to 7% rise in capital city housing prices for the year.
In its Q3 global outlook, ANZ discussed how economies are progressively moving to the next phase of the economic cycle. The European Central Bank, the Bank of Canada, Swiss National Bank and Riksbank in Sweden have started easing, and the bank expects the US Federal Reserve to begin easing in September, the Bank of England in Q3, and the Reserve Bank of New Zealand in Q1 2025.
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