Forecast for an RBA interest rate cut in Q1 2025 “at the earliest”

The Reserve Bank of Australia left its cash rate unchanged yesterday at 4.35%, its highest in 13 years:

Reserve Bank of Australia Governor Bullock spoke extensively at her press conference following the Statement, links here:

ING have assessed what we got from the Bank yesterday, saying that while the RBA acknowledged that underlying inflation remains elevated and the economic outlook uncertain, it noted encouraging signs of moderating price pressures. This has bolstered the RBA’s confidence that inflation is gradually moving toward its target range. ING says the statement struck a slightly dovish tone, with the RBA highlighting that some inflationary risks appear to have eased. At the same time, household incomes and consumption have recovered more sluggishly than previously anticipated, presenting a mixed picture of the domestic economy.

Further:

• Data from October showed the trimmed mean Consumer Price Index (CPI) edging up from 3.2% to 3.5%. The measure remains above the RBA’s target range, with policymakers expecting headline inflation to remain elevated until at least 2026. However, there is increasing confidence within the central bank that wage pressures have eased more than expected, and the subdued growth in household consumption has further tempered inflationary risks.
• Looking ahead, ING analysts maintain their expectation for a rate cut in the first quarter of 2025. However, they caution that this projection remains contingent on future economic data, particularly consumer spending patterns. Any significant improvement in household consumption could delay the timeline for monetary easing.

  This cautious optimism reflects the delicate balancing act the RBA faces as it navigates a complex economic landscape marked by persistent inflationary pressures and weaker-than-expected domestic demand.

Key quote:

• we maintain our call for a rate cut in the first quarter of next year, but it remains an “at the earliest” view, and there is certainly scope for this to be pushed back especially if the consumption data improves over the next few months.