UBS pushes back first rate cut forecast to May 2025
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The news: UBS has shifted its prediction for interest rates, pushing back its forecast for the first rate cut to May.
Previously, UBS had tipped February as the beginning of the easing cycle.
The numbers: The new forecast tips a 25 basis point cut in May, down from the current 4.35% rate.
UBS then expects the Reserve Bank to cut about 25 basis points a quarter, in what would be a gradual easing, to a low of 3.1% in the second quarter of 2026. Its previous prediction had the low at 2.85%.
The new view takes into account a base case of extra federal government spending, in light of "unexpected policy announcements recently".
The context: The change in expectation followed the RBA's November rate decision, with the bank keeping interest rates on hold and maintaining similar language to its September statement.
UBS has interpreted the position as remaining hawkish.
What they said: "We still see the RBA lagging the easing cycle of other major global central banks. Previously, we flagged the risk of an even later start to the RBA cutting rates. Given the RBA's surprising hawkishness today [on Tuesday], we revert back to our prior view," UBS said in a note.
The source: UBS research
