‘It’s On’: Three Major Banks Now Expect Major RBA Rate Cut In February

Three of Australia’s big four banks have changed their forecasts, now expecting the RBA to cut interest rates sooner than anticipated. A key inflation report has shifted expectations, but will the central bank act in February? Mortgage holders are watching closely, hoping for relief after months of high rates.

Published on
Read : 2 min
big four banks australia
‘It’s On’: Three Major Banks Now Expect Major RBA Rate Cut In February | en.Econostrum.info - Australia

Australia’s inflation rate has fallen more than expected, prompting three of the big four banks to revise their forecasts and predict the Reserve Bank of Australia (RBA) will cut interest rates in February. Westpac is the latest to bring forward its expectations following the release of the latest Consumer Price Index (CPI) data.

Inflation Slows, Increasing Likelihood of a Rate Cut

The Australian Bureau of Statistics (ABS) reported that annual inflation slowed to 2.4%, with a quarterly rise of just 0.2% in December. Underlying inflation, a key metric closely watched by the RBA, fell to 3.2% annually, its lowest level in three years.

The data has reinforced expectations that the RBA may begin easing monetary policy sooner than previously anticipated. Westpac’s chief economist Luci Ellis, a former RBA assistant governor, stated that the figures provide the necessary confidence for the central bank to begin a rate-cutting cycle in February.

“Normally it should not come down to one number,” Ellis said. “This round, however, the CPI has been the deciding factor because the message from other available data has been so mixed.”

Three Banks Now Predict a February Rate Cut

Commonwealth Bank (CBA), ANZ, and Westpac now expect the RBA to lower interest rates in February.

  • CBA has maintained its February forecast since October.
  • ANZ initially predicted a cut in May but revised its outlook earlier this month.
  • Westpac, which also expected a May cut, changed its forecast following the latest inflation report.

National Australia Bank (NAB) has yet to publicly revise its stance.

Gareth Aird, head of Australian economics at CBA, said the inflation data was a green light for the RBA to begin easing rates.

“Today’s inflation report was overall a little softer than the market expectation, but very much in line with our forecasts,” Aird said. “Importantly, it was materially softer than the RBA had anticipated when it published its latest forecasts.”

How Far Could Rates Drop?

Market expectations now lean toward a 25-basis-point cut in February, followed by further reductions throughout 2025 if inflation continues to ease. However, the RBA has previously indicated that it wants to be certain that inflation is sustainably within its target range of 2-3% before making adjustments.

For mortgage holders, an early rate cut could provide much-needed relief after 12 consecutive rate hikes between May 2022 and November 2023. Some borrowers have warned they may be forced to sell their homes if rates remain high until May.

The RBA’s first policy meeting of 2025 is scheduled for February 6, when the board will decide whether to act on the latest inflation data or wait for additional confirmation of a sustained downward trend.

Leave a comment

Share to...