'Less urgency' to ease, suggests Big Four member
ANZ has adjusted its Reserve Bank of Australia (RBA) cash rate forecast, now projecting fewer interest rate cuts in 2025 than previously anticipated.
While a 25-basis-point cut at next Tuesday’s meeting appears bolted on, “there is less urgency to ease over coming months”, economists said in a market update.
Previously expecting a trio of 25-basis-point cuts between May and August, ANZ now foresees just two, in May and August, bringing the cash rate to a neutral 3.35% by late 2025, with a final cut deferred to early 2026.
“Easing in May is likely the ‘path of least regret’ for the RBA, given the uncertain global backdrop (notwithstanding the recent lift in equity markets) and encouraging inflation outcomes over the past two quarters,” said economists.
However, a rate cut in July appears increasingly unlikely. Progress in US-China trade talks has reduced the immediate threat of a global economic shock, diminishing the need for accelerated easing.
RBA Governor Michele Bullock (pictured) is expected to remain non-committal about future moves during the upcoming press conference, said the bank, with long-run inflation forecasts likely to remain anchored.
“That said, we still expect a softer outlook for domestic activity (household consumption and business investment) than we did prior to 2 April, which in turn suggests the need for additional rate cuts from the RBA beyond the expected easing next week.”
The banking majors have mixed opinions on where interest rates will end up this year. CommBank is more dovish than ANZ, with chief executive Matt Comyn still anticipating three cuts before 2025 comes to a close.
NAB is even more dovish, with expectations of a jumbo 50-basis-point cut next week followed by four more before the end of the year.
