ANZ delays expectations for first interest rate cut to 2025
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The news: ANZ has pushed back its expectations for the Reserve Bank of Australia's first rate cut from November 2024 to February 2025.
The numbers: Since November 2022, ANZ has expected that the first cash rate cut in Australia during the current cycle to be in November 2024.
However, the bank now expects the RBA to wait until February next year, with three 25 basis point (bps) rate cuts by the final quarter of 2025. It noted that risks around the quantum of easing were skewed to two cuts, or 50bps in total, being more likely than four, or 100bps.
The context: ANZ analyst Adam Boyton said the big four lender has been cautioning that risks were skewed to a later start to the easing cycle than it previously guided.
He noted that several factors have caused those risks to become "sufficiently material" to prompt a formal change in ANZ's cash rate view.
Those factors included the Q1 national accounts showing less weakness in household consumption, recent labour market performance suggesting that trend growth could be as low as 2%, and government consumption continuing to add to GDP growth and supporting employment.
The stronger-than-expected Q1 Consumer Price Index also made it hard to view the RBA being sufficiently confident that inflation would return to and stay in the band by the time the November meeting came around, he said.
What they said: "It’s not that monetary policy isn’t working. It is. The economy has clearly slowed, particularly across private final demand. It’s for this reason that we think a rate hike remains unlikely," Boyton said.
The source: ANZ research
