‘Not if, but when’: Rate cuts could be delayed until 2025, experts predict

Investing

The Reserve Bank of Australia (RBA) is unlikely to lower interest rates until at least 2025, despite the easing inflation, according to the Finder RBA Cash Rate Survey.
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Key Takeaways
  • Almost 3 in 4 experts say inflation numbers are not enough to bring forward rate cuts.
  •  73% believe the federal government’s stage 3 tax cuts will not drive inflation higher.
  •  All experts believe the RBA will hold the cash rate at 4.35% in March.

There’s a consensus that the cash rate will be maintained at 4.35% in March, reflecting a cautious approach towards the nation’s economic recovery.

Graham Cooke, head of consumer research at Finder, optimistically noted that the cost of living crisis might be on the verge of easing.

“With inflation continuing to reduce, it seems the RBA’s rate hikes are having the desired effect,” Cooke stated.

“The question is now not if the RBA will cut rates – but when?”

Graham Cooke

Amidst a cooling economy, inflation easing, and reduced household spending, experts like Anthony Waldron from Mortgage Choice see no immediate reason for the RBA to adjust the cash rate. Similarly, Matthew Peter from QIC pointed out that while inflation is diminishing, a sluggish economy coupled with factors like elevated migration and upcoming tax cuts are reasons for the RBA to hold off on easing monetary policy for now.

Interestingly, nearly three-quarters of the surveyed panel do not believe that the recent inflation data is compelling enough to warrant earlier rate cuts. A significant segment, about 25%, anticipate that the RBA won’t initiate rate reductions until 2025, casting a long shadow for homeowners eager for a break.

Economists are divided on the timeline for the first rate cut, with an equal split predicting either before or after September. A small fraction, however, remains hopeful for a reduction as early as May.

The survey also touched on the potential influence of the US Federal Reserve’s actions on the RBA’s decisions. Over half of the experts (55%) doubted that Fed rate cuts would prompt an immediate response from the RBA.

In a surprising consensus, 73% of experts believe that the federal government’s stage 3 tax cuts, set to roll out, will not exacerbate inflation pressures.

“The short term impact may offset cost of living pressures, as opposed to genuinely loosening household financial conditions,” Nicholas Frappell from ABC Refinery said.

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