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Commonwealth Bank has finally revised its prediction that mortgage holders will be treated to a pre-Christmas interest rate cut.
Before today, CBA had been the only one of the big four forecasting the Reserve Bank would bring the cash rate down in December from its current 4.35 per cent, with the others predicting a February cut.
But while this morning’s consumer price index figures showed the headline inflation slowing to its lowest annual level since March 2021, and its lowest quarterly rise since June 2020, Commonwealth Bank said core inflation remained too high to justify a cut next week or in December.
“The September quarter 2024 CPI indicated that the disinflation process has continued. But not quite at the pace we anticipated on an underlying basis,” bank head of Australian economics Gareth Aird and senior economist Stephen Wu wrote.
“The upshot is that we no longer expect the RBA to cut the cash rate in December 2024.
“Instead we pencil in February 2025 for a 25 basis-point rate decrease.”
Core or underlying inflation did fall substantially in the September quarter, down 0.5 per cent to 3.5 per cent – its lowest level since December 2021, but still outside the RBA’s target range of 2-3 per cent.
The ABS also revealed that services inflation actually rose slightly, up 0.1 per cent.
“Any hope of a cash rate cut in 2024 is now well and truly dead in the water,” Canstar data insights director Sally Tindall said.
“While headline inflation is now officially in the RBA’s target band, this number is largely based on smoke and mirrors created by temporary electricity rebates and volatile petrol prices.
“Trimmed mean inflation, which is the RBA’s preferred measure, is still too far out of striking distance for the board to change tack, particularly with services inflation moving in the wrong direction.
“Unfortunately, Australian borrowers will need to keep their shoulder to the wheel into 2025.”
All of the big four banks are now predicting the RBA will reduce interest rates in February, although their forecasts of how many cuts will take place in 2025 vary.
ANZ believes the RBA will slash the cash rate by 0.25 per cent three times, both CBA and Westpac have pencilled in four cuts, while NAB is predicting five.
According to Canstar, four rate cuts, which would reduce interest rates by 1 per cent, would reduce repayments for a $600,000 mortgage by $357 a month – nearly $4500 a year.
