ANZ economist believes that the first rate cut will happen in February next year
The Reserve Bank of Australia (RBA) will be holding the cash rate at 4.35% and the first cut on rates will be seen in February 2025, according to ANZ economist Adam Boyton (pictured above).
In a report released by ANZ Research, Boyton pointed out that the firm had not changed its forecasts regarding the RBA’s decisions even as the Q2 Consumer Price Index (CPI) had been released.
“We continue to see the RBA holding at 4.35% until the first cut in February 2025, with the cash rate to end that year at 3.60%, the low for the cycle,” said Boyton.
The economist said that despite the trimmed mean inflation being higher than the RBA’s May Statement on Monetary Policy (SMP) forecast, it was not enough to cause a hike on rates.
“The higher-than-forecast Q2 trimmed mean inflation outcome will likely see the board retain a hawkish tone in the post-meeting statement, which Governor Bullock will echo in the press conference,” Boynton said.
While the next RBA meeting and decision coincides with the release of the SMP for August, Boyton said that the trimmed mean inflation forecasts should only see little changes from the numbers published in May as well as show core inflation to be around 2.5% in 2026.
“With trimmed mean inflation having averaged 0.94% q/q over the past two quarters, we doubt the board will have sufficient comfort on the inflation front to cut in November. Therefore, a rate cut this year would most likely require a more rapid deterioration across activity than we expect,” Boyton said.
“While you can’t call the trend in retail sales strong, or even solid, the increases in May and June combined with the lift in ANZ Roy-Morgan Australian Consumer Confidence could be flagging that the consumer sector has moved past its weakest point.”
