When will the Reserve Bank cut rates?

IT’S the question on everyone’s mind, including eight of the country’s top economists.

Even the RBA doesn’t really know when it will start reducing the cash rate that has stood at 4.35 per cent since last November – following 13 quickfire hikes.

The RBA and governor Michele Bullock are leaving all options on the table, judging by comments in the minutes of the latest meeting when it said “conditions might need to be either tighter or looser than at present to achieve” its objectives,

Over the past few weeks, a flurry of mortgage rate reductions by the big banks – and a change of tune from NAB, bringing forward its prediction of a cut from May to February – had Australian Conveyancer looking at what economists are saying.

As the minutes of the latest meeting were released, Bendigo Bank chief economist David Robertson also touched on the possibility of rate cut being brought forward from its May prediction, but conceded that it would depend on how quickly inflation moderated.

Headline inflation fell to 2.7 per cent in August.

That’s the first time it was back within the Reserve Bank’s target band since August 2021.

“The strength in labour markets and ongoing population growth have shielded our economy from the full effects of higher interest rates and the inflation shock,” Mr Robertson said.

“As a result, we predict the first rate cut here in Australia to occur by May 2025, with a strengthening case for February next year.”

Here’s what other economists are saying.

NAB – February, 2025

NAB announced in its latest Monetary Policy Update this week that it has shifted its forecast to February.

Its economics team expect the RBA to steadily lower the official cash rate once per quarter, eventually stopping at 3.1 per cent in early 2026.

CBA – December 2024

CBA’s had been predicting a November reduction, but has pushed that back to December.

Head of Australian economics Gareth Aird predicts a 2024 cut as it sees inflation reducing faster than the RBA does.

Ray White – 2024

The Ray White Group’s Nerida Conisbee also thinks falling inflation could put enough pressure on Michele Bullock to act before the end of the year.

While it’s not a view shared by the majority of economists, analysis of what happens to house pricing after a rates cut makes interesting reading.

“With inflation now edging towards three per cent and markets are now pricing in potentially four rate cuts next year, it is possible that we will see a rate cut before the end of the year,” she said.

Westpac – February

Westpac’s chief economist Lucy Ellis continues to believe that the RBA will make its first cut to interest rates (to 4.1%) in February next year.

Based on the Board’s statement and media conference, we do not see any reason to change our current view, Ellis said.

ANZ – February

ANZ economists think that the first round of cuts are likely to occur around February 2025, with the cash rate falling to 3.60% by next November.

HSBC – June, 2025

Reflecting a growing view that RBA rate cuts could be delayed beyond the expected start of February, HSBC’s Paul Bloxham also saw a possibility that the RBA could “miss the easing phase altogether.”

“Our central case is that cuts do not begin until the June quarter but there is some risk that it could take even longer than that,” he said.

Capital Economics – June

“The RBA is starting to tilt into a more dovish direction,” Capital Economics head of Asia-Pacific Marcel Thieliant said after the last rates meeting. But he was sticking to a June quarter cut.

“For a start, the board didn’t discuss a rate hike at today’s meeting for the first time since its March meeting.

The RBA’s next rate setting meetings are on November 4-5 and then again on December 9-10.

CBRE – November

Is still expecting two 25bps cuts to occur in November and December, followed by four cuts in 2025.

Longer-term, CBRE expects the cash rate to sit between 1.5% – 2.5%.