Economic analysts and bank bosses have revealed an interest rate cut is on the horizon in good news for Australians struggling with a mortgage.
Westpac chief economist Luci Ellis told Daily Mail Australia on Tuesday the bank expected rates to fall in the coming months.
‘The question really is when and to what extent?’ she said.
‘We still think the most likely start date is May, but there is the possibility of an earlier start, for example at the February meeting or the April meetings.
‘It really just depends on the data you get here. There are some clear uncertainties that will be informative for the Reserve Bank.
“They have changed their view a little bit because they are no longer as aggressive with rate cuts as they have been in recent months.”
“I think there’s still a lot of data left to convince them that they’re on the right path to getting inflation back to the middle of that target range.”
NAB Group chief executive Andrew Irvine said this week he expected the RBA to cut interest rates by mid-year.
Economic analysts and bank bosses have revealed an interest rate cut is on the horizon in good news for Australians struggling with a mortgage (file image)
The cash rate is currently at a 12-year high of 4.35 percent. The cash rate was first increased from 0.1 percent to 0.35 percent in May 2022.
“When we get that first rate cut, I think it will have a significant impact on the psyche of consumers as well as business people, which will probably be much greater than the actual impact it will have on cash flow,” Irvine said. to a bank. information sheet.
Irvine said he expected two rate cuts after the initial one over the next 12 months.
This was part of an overall optimistic assessment that the economy would improve in 2025.
“In my opinion, we are at the most difficult point in the economic cycle and things will get better from here,” Irvine said.
“We’re seeing tax cuts for Australians who are mostly saving, so deposit balances are increasing in the sector, which I think is promising.”
However, he admitted that many were having a hard time.
“People are juggling, budgeting and trying hard to make ends meet every month,” Irvine said.
Westpac chief economist Luci Ellis told Daily Mail Australia on Tuesday the bank expected rates to fall over the next 12 months.
‘The most important thing for us is employment and strong labor market conditions across Australia and low unemployment.
‘Usually, in my experience, as long as people have jobs and there is income in the household, most of the bills, most of the mortgage payments are covered and the worst doesn’t happen.
‘I think at the end of this year we will start to see good growth.
Previously, banks NBA, ANZ and Westpac had forecast a 25 basis point cut in May, taking the rate to 4.1 per cent.
In an article published last month, Commonwealth Bank’s head of Australian economics, Gareth Aird, bravely stood by his prediction of an earlier interest rate cut, specifically after the RBA’s first meeting in February.
“Our base case is for the RBA to begin normalizing the cash rate in February 2025 with a 25 basis point interest rate cut,” he wrote.
“We expect easing of 100 basis points throughout 2025, which would take the cash rate to 3.35 percent.”
Aird said the Commonwealth Bank was encouraged by the RBA’s “dovish tilt” in its final statement of the year and in comments made by Governor Michele Bullock at a press conference.
Rates were left unchanged in December for the 13th consecutive month after the RBA quickly raised them to 4.35 per cent in the wake of the Covid pandemic.
“Today’s statement encourages us to call for a rate cut in February,” Mr Aird said.
“But we haven’t crossed the line yet.”
Big banks have estimated between two and five interest rate cuts by 2025.