RBA will struggle to cut rates this year: survey Cecile LefortMarkets reporter
Apr 2, 2024 – 5.00am
The Reserve Bank of Australia is expected to be the last major central bank to start cutting interest rates and economists predict the cash rate will remain on hold at least until November.
A sizeable minority of economists say 2025 is more realistic for the first interest rate cut from the RBA because inflation hasn’t slowed as much as other countries and the job market remains tight.
The Swiss central bank surprised the market last month with an interest rate cut, heightening expectations about which of its peers will move next. Markets are fully priced for the US Federal Reserve and the European Central Bank to ease policy in July, but there is a strong chance of both cutting in June.
In Australia, a resilient labour market, booming migration, rising house prices, and a sharemarket at record levels, suggest that the RBA’s 13 rate increases – or a whopping 4.25 percentage points – since 2022 are still filtering through the economy.
The median forecaster in The Australian Financial Review’s survey of 39 economists shows the RBA will start cutting rates in November, while financial markets project it will happen in September. Both groups have consistently pushed out the timing of the first cut over the past 12 months.
This time last year, economists and traders thought the RBA would have kicked off its monetary easing cycle by now, with economists in the April 2023 survey forecasting a rate cut in February.
In the latest quarterly survey, half of the respondents predict at least two rate reductions this year and more next year. The median forecast is for the cash rate to bottom at 3.1 per cent, which would be equivalent to five cuts of 0.25 percentage points each this cycle. The most aggressive predictions suggest a total of seven rate reductions and the most shallow have only two
