Major banks' RBA interest rate cut call a win for borrowers: 'Now is the time'
Three of the Big Four banks now expect the Reserve Bank of Australia (RBA) will cut the cash rate when it meets in less than two weeks. Westpac is the latest bank to announce it is bringing forward its forecast, with Wednesday's inflation data bolstering the case for rate relief.
Westpac chief economist Luci Ellis said the bank now expected the next cut in July rather than August, but warned it wasn't the 'shoe-in' that markets seem to think it is. Markets are currently pricing in an 86 per cent chance of a cut next month.
'The RBA has sometimes defied market pricing if offshore risks are being over-weighted, but now is the time to bring forward a move it knows it will likely make soon anyway,' Ellis said.
RELATED
Commonwealth Bank changes RBA interest rate cut call
Centrelink payment alert for 58,000 Aussies in caravans
Centrelink $836 cash boost for 'very real' truth facing thousands of Aussies
Headline inflation eased to 2.1 per cent over the year to May, down from 2.4 per cent the previous month. Trimmed mean inflation was down to 2.4 per cent in May, from 2.8 per cent in April, which was the lowest rate since November 2021.
Commonwealth Bank yesterday brought forward its forecast and also expects the next cut in July, followed by another cut in August.
Ellis said the monthly CPI data came in below its expectations and helped to bring forward inflation's return to the 2.5 per cent target midpoint and keep it there.
However, she warned the upcoming June quarterly inflation numbers were likely to "print on the high side', so some caution on the inflation outlook was likely and warranted.Despite this, Ellis said the RBA would have been planning to cut rates soon anyway and would likely decide it 'may as well get on with it rather than make a contestable argument for further delay'.
Ellis said the RBA would be shaped by concerns about the tight labour market, slow economy productivity growth and the pricing implications of recovering demand.
Westpac expects there will be a further three cuts after the July cut, bringing the cash rate down to 2.85 per cent. The timing will depend on the RBA's post-meeting tone, with the bank currently expecting them in November, February and May.
Westpac, Commonwealth Bank and NAB expect the next cut to come on July 8, while ANZ still expects an August cut.
A borrower with a $600,000 debt today and 25 years remaining could see their monthly repayments drop by $90 following a 0.25 per cent cut in July, according to Canstar.
CBA and ANZ expect a total of two more cuts, while NAB expects three and Westpac four from now on.
If there are two further cuts, this could see repayments drop by almost $180, while if there are four, repayments could drop by $350.
Canstar data insights director Sally Tindall said borrowers should start 'putting pressure' on lenders to get their mortgage rate down ahead of any further cuts.
'At this point, there are over 35 lenders on the Canstar database offering at least one variable rate under 5.50 per cent for owner-occupiers paying principal and interest. Now is the time to use this competition to your advantage,' she said.Sign in to access your portfolio
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Forbes
3 hours ago
- Forbes
What To Expect From June's CPI Inflation Report
WASHINGTON, DC - JULY 9: Chair of the Federal Reserve of the United States Jerome Powell speaks ... More during a Senate Banking, Housing, and Urban Affairs Committee hearing on the Semiannual Monetary Policy Report to Congress at the U.S. Capitol on July 9, 2024 in Washington, DC. Powell in earlier remarks was quoted, "we want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy." (Photo by) June's Consumer Price Index report will be released on July 15. Nowcasts project relatively low month-on-month inflation of 0.23% to 0.25%, that's according to the analysis of the Federal Reserve Bank of Cleveland. If so, that would signal continued subdued inflation. It would also be consistent with cooler inflation readings reported since February of this year. Inflation would still be running above the Federal Open Market Committee's 2% goal on an annual basis, with most inflation metrics closer to 3% than 2%. However, some of that deviation from target on an annual basis reflects rising prices between November 2024 and January 2025 and more recent readings have been more subdued. Upside Risks From Energy and Tariffs Although, cooling inflation is forecast, the report will be closely watched for the impact of tariffs. So far, tariffs have not had a material impact on CPI inflation readings, but that could change as several firms have stated they plan to raise prices in June and July. The CPI report will offer an assessment on whether that is occurring. Producer Price Indexes for May showed some moderate inflation in goods prices. That may be a leading indicator of what is coming for CPI inflation, though for now, the implied inflation appears mild. Academic studies have picked up some tariff price increases too, though again these are relatively tame. Fed Vice Chair for Supervision Michelle Bowman said the following about inflation risks on June 23. "Despite progress on lowering inflation, there are potential upside risks if negotiations result in higher tariffs or if firms raise goods prices independent of any tariff pass-through. Although we have not seen evidence of disruptive impacts on supply chains, changes in global trade patterns could lead to an increase in prices for goods and services. The current conflict in the Middle East or other geopolitical tensions could also lead to higher commodity prices. I am certainly attentive to these inflation risks, but I am not yet seeing a major concern, as some retailers seem unwilling to raise prices for essentials due to high price sensitivity among low-income consumers and as supply chains appear to be largely unaffected so far." Energy prices spiked in mid-June on conflict between Israel and Iran, but have now fallen back to close to earlier levels, although oil price volatility remains somewhat elevated. Energy prices matter because they impact the price of many goods and services. Housing Costs A major category for the CPI index is shelter costs. This makes up about a third of the overall series, given its importance in U.S. household budgets. Since 2023, shelter price increases have generally eased according to U.S. Bureau of Labor Statistics data, which has helped bring overall CPI inflation closer to the FOMC's 2% target. To the extent shelter costs continue to cool in the coming months that may offset potential tariff impacts. The Fed's Reaction To Inflation After a brief acceleration in inflation in late 2024 which caused some concern, the FOMC has been encouraged by recent subdued inflation reports since February 2025. However, policymakers are balancing risks from potentially higher inflation against some chance of a deteriorating labor market. Assuming June delivers another tame inflation reading, then the attention of policymakers may be more focused on labor market risks. For now, jobs data has generally been robust. However, retail sales data saw a sequential decline for May, which could be a one-off datapoint or may point to some softening in the economy. Currently the CME FedWatch Tool implies a 1 in 4 chance of the FOMC cutting rates at their next meeting on July 30.
CNBC
3 hours ago
- CNBC
Aussie, kiwi climb toward 2025 highs as US dollar weakens on Fed autonomy concerns
The Australian and New Zealand dollars extended their winning streaks on Thursday, approaching the highest levels so far in 2025, as the U.S. dollar fell to multi-year lows on concerns over the future independence of the Federal Reserve. The Aussie strengthened 0.5% to $0.6542, just within a whisker of its recent peak of $0.6552, the highest level since last November. The currency has climbed for four consecutive sessions, with the recovery from Monday's sharp low of $0.6373 reinforcing a sustained upward trend. The kiwi also gained 0.5% to $0.6065, just under its recent top of $0.6088, the highest since last October. It remains well above Monday's low of $0.5883, hit after U.S. strikes on Iran sparked fears of a widening conflict in the Middle East. In the broader market, the dollar slipped to more than three-year lows against its major currencies after the Wall Street Journal reported that U.S. President Donald Trump has considered announcing Fed Chair Jerome Powell's replacement by September or October, aiming to undermine his position. Down Under, Westpac has become the latest bank to predict a rate cut from the Reserve Bank of Australia in July, after a subdued inflation reading for May raised the risk of inflation slipping below the midpoint of the RBA'S 2-3% target band. "What we are about to see is an RBA that was planning to cut rates soon anyway deciding it may as well get on with it rather than make a contestable argument for further delay," said Luci Ellis, chief economist at Westpac. "But this is not the timing it previously thought it would be on. Given the lingering uncertainties and the RBA's concerns about a tight labour market, expect its post-meeting language to be non-committal, even a little grudging about the decision to cut." In the bond market, three-year bond futures hit a two-month high of 96.78, having rallied 4 ticks on Wednesday, helped by expectations that the RBA will cut rates as soon as next month. They, however, ran into selling pressures at a major chart level of 96.79. Yields on 10-year Australian government bonds were flat at 4.12%, having come a long way from highs of 4.583% briefly touched in mid-May. Alex Cousley, senior portfolio manager at Russell Investments, is bullish about Australian government bonds, citing improved inflation prospects Down Under. "We are of the view that if deficits and debt become the big narrative in government bond markets, Australia is a pretty good place to hide."
Yahoo
4 hours ago
- Yahoo
Australians' insane net worth revealed
Australia's household wealth has surged again in the March quarter off the back of rising house and land prices. Australia's net wealth rose by $125.3bn, new Australian Bureau of Statistics figures show. Overall, households are now worth $17.3 trillion. This was in part driven by house price rises, which were up 0.7 per cent in the 2025 March quarter. While house prices have risen for eight consecutive quarters, year-on-year growth has slowed to 4.2 per cent from 8.0 per cent in March 2024. At the same time, household borrowing grew by 1.4 per cent, or $42.4bn, reducing the overall growth in household wealth by 0.2 percentage points. The demand for credit was up $136.1bn in the March quarter, including $25.9bn in household borrowing, $45.9bn in private non-financial corporation borrowing and $45.5bn in government credit. ABS head of finance statistics Mish Tan said the growth in credit was likely to continue. 'The RBA's cash rate cut in February this year was the first easing of interest rates since November 2020, giving some relief to household budgets in the March quarter through lower mortgage interest payments,' Dr Tan said. 'We expect to see the broader impact of recent cuts, including another in May, on house prices and credit growth later this year.' The May interest rate cuts will be included in next quarter's figures. Household deposits rose 1.7 per cent ($29.5bn) in the March quarter, contributing 0.3 percentage points to the overall rise in household wealth. Superannuation assets fell 0.4 per cent, or $16.4bn, reducing the overall growth in household wealth by 0.1 percentage point. The fall was driven by slowing domestic and overseas equity markets. 'Household superannuation balances fell for the first time since the September quarter 2022, as global uncertainty weighed on share prices,' Dr Tan said. Error in retrieving data Sign in to access your portfolio Error in retrieving data
