The Commonwealth Bank of Australia has decided to postpone the expected date of the Reserve Bank of Australia’s first interest rate cut from November 2024 to December 2024.
- Expect a 25 basis point cut.
- The recent strength in employment growth coupled with relatively hawkish rhetoric from the RBA Governor means we now see December as the most likely month for the start of a normalisation of cash rates.
Reason for CBA:
- Average CPI for Q3 24 expected to fall below RBA forecast
- The Board meeting will be held in December after the release of the National Accounts for Q3 2024, meaning the Board will have a full view of the performance of the Australian economy during the September quarter.
- We expect the third phase of tax cuts to have a small positive impact on household consumption in Q3 2024. This in turn should make the RBA more confident that inflation will return sustainably to the target range, thus opening the door to a December rate cut.
- We expect the RBA to begin an easing cycle before declaring that we have reached full employment as policy is currently constrained – waiting until the target is reached before normalising interest rates means unemployment will rise by more than is necessary and desirable.
- We continue to expect the RBA to ease by 125bp by the end of 2025, which would take the cash rate to 3.10%.
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Remaining meeting dates for this year and a look at meetings for the first half of next year:
This article was written by Eamonn Sheridan on www.forexlive.com.