The big four banks are divided on when the Reserve Bank of Australia will deliver interest rate cuts. The board is set to make its final decision of the year on Tuesday, with the central bank under pressure to provide mortgage relief to millions of homeowners as many struggle with the cost-of-living crisis.
Motley Fool chief investment officer Scott Phillips told Yahoo Finance “the entire financial would be shocked if they didn’t hold” the cash rate at 4.35 per cent. This is where it has sat for over a year now, squeezing mortgage holders in a bid to drive down inflation.
Westpac, National Australia Bank (NAB), the Commonwealth Bank of Australia (CBA) and ANZ have all made a sensational retreat from predictions of multiple 2024 rate cuts.
None of the leading banks’ economists have forecast a cut following the December meeting and their 2025 predictions differ.
Westpac, NAB and ANZ don’t think there will be an interest rate cut until May.
Commonwealth Bank has remained the outlier and doubled down on predictions that mortgage holders will have repayments softened in February next year — the first meeting of 2025.
A Yahoo Finance live blog will bring you expert predictions and commentary as the RBA decides the cash rate on Tuesday, December 10.
NAB was the first of the big four banks to tip that the official cash rate will hold at current levels until May 2025. They were followed by Westpac, with ANZ joining the pack just last week.
So, how far do the big banks think rates will fall next year?
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Commonwealth Bank: First cut in February 2025, with 5 cuts to bring cash rate to 3.10 per cent
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Westpac: First cut in May 2025, with 4 cuts to bring cash rate to 3.35 per cent
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NAB: First cut in May 2025, with 5 cuts to bring cash rate to 3.10 per cent
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ANZ: First cut in May 2025, with 2 cuts to bring cash rate to 3.85 per cent
CBA senior economist Belinda Allen said Australia’s GDP figures undershot the RBA’s expectations of growth of 1.5 per cent for the 12 months until December 2024.
“This seems optimistic and we believe these forecasts are too strong,” she said on Friday.
“For this reason, together with a lower‑than‑expected quarter 4 24 CPI print (we currently expect a trimmed mean of 0.6 per cent, risk of 0.5 per cent), softer wages growth and a lift in unemployment, a rate cut in February remains our base case.”
The cash markets now predict an even chance of a rate cut in February, up from 25 per cent before GDP figures dropped.