Commonwealth Bank boss makes major $181 RBA interest rate cut call
The boss of Australia's biggest bank has poured cold water on expectations for the Reserve Bank of Australia (RBA) to gift mortgage holders with a supersized cut next week. The central bank will announce its decision on interest rates on Tuesday, with a cut largely anticipated.
Commonwealth Bank chief executive Matt Comyn expects the RBA will cut interest rates next week, with rate cuts on the cards for later in the year. While the central bank is expected to acknowledge the volatile global environment, Comyn said its main focus would be the drop in inflation to fall within its 2 to 3 per cent target band.
'We certainly still think it's likely that they will reduce by 25 basis points,' he said.
'I think it's incredibly unlikely it's more than that, even though the market seems to be pricing in some possibility of that.'
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NAB is expecting a jumbo 50 basis point cut next week, while Westpac and ANZ think it will be the standard 25 basis point cut.
Economist Stephen Koukoulas has called for a 50 basis point cut next week and said the RBA needs to act to rebalance the economy.
"If it delivers a 25 basis point interest rate cut, it will be only a baby step towards getting interest rates to a neutral level," he wrote for Yahoo Finance.
"Too little too late."
A 25 basis point cut would save the average borrower $91 on their monthly repayments based on a $600,000 loan with 25 years remaining, according to Canstar.
A 50 basis point cut would double this and save the average borrower $181 on their monthly repayments.
Wages grew by 0.9 per cent in the March quarter, with the annual rate increasing to 3.4 per cent, which was stronger than economists had expected.
CBA economist Stephen Wu said the data was in line with the RBA's forecast and continued to suggest next week's cash rate decision would 'very likely' be a 25 basis point cut.
'But the decision will be between on - hold and a 25bp cut, rather than considerations of a 50bp cut,' Wu said.
Westpac senior economist Justin Smirk said wages rose stronger than Westpac had expected, but it wouldn't stop a May rate cut.
'While March was an upside surprise, we do not believe it is enough to prevent a May rate cut as it was still consistent with the moderation in wages we have been expecting,' he said.
Headline inflation rose by 0.9 per cent in the first quarter of the year, while the annual rate held firm at 2.4 per cent.
Underlying inflation increased by 0.7 per cent in the quarter, with the annual rate easing to 2.9 per cent.
All Big Four banks are expecting interest rates will be cut in May.
Here's what they are forecasting for the rest of the cycle:
CBA - Three cuts in May, August and November to bring end of year cash rate to 3.35 per cent
Westpac - Three cuts in May, August and November to bring cash rate to 3.35 per cent
NAB - Five cuts in May (50 basis points), July, August, November, and February to take cash rate to 2.60 per cent
ANZ - Three cuts in May, July and August to bring cash rate to 3.35 per cent
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