CBA pushes back interest rate cut expectation to February 2025
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The news: Commonwealth Bank has joined the other big four banks in postponing its interest rate cut expectations until next year, following the latest inflation figures.
The numbers: The bank said it no longer expected the Reserve Bank to cut the cash rate in December 2024 and has pencilled in February 2025 for a 25 basis point rate decrease.
Today, the Australian Bureau of Statistics announced that the consumer price index rose 0.2% in the September quarter in headline terms, or 2.8% on an annual basis — which was inside the RBA’s target range.
The context: CBA’s economics team noted that the trimmed mean inflation of 0.8% was “a touch firmer” than anticipated, which prompted the revision of their forecast.
What they said: “Notwithstanding, the disinflation process is intact and we pencil in February 2025 for the first 25bp rate cut. We now look for 100bp of easing over the year that would take the cash rate to 3.35% (previously we had an end 2025 cash rate of 3.10%),” CBA said.
“The shift downward in inflation has been a bumpy ride as observed by the swings in the quarterly changes in underlying inflation. But this is to be expected. The disinflation process is never a smooth one on a quarterly basis. Overall the glide path of returning underlying inflation to the target band is intact.
“Most encouragingly the six‑month annualised pace of underlying inflation has stepped down from 3.8% to 3.3%.”
The source: Commonwealth Bank of Australia
