When Interest Rates Will ‘Fall SEVEN Times’: Westpac Reveals Forecast That Will Give Hope to Millions of Mortgage Holders and First-Time Home Buyers
- Westpac expects seven rate cuts by 2024, 2025
- That’s after three hikes in March, April and May.
Westpac now expects seven interest rate cuts in 2024 and 2025 after severe Reserve Bank hikes hit the economy.
Borrowers since May last year have faced nine straight monthly RBA rate hikes, and Westpac expects three more in March, April and May that would push the cash rate to an 11-year high of 4.1 percent.
But after that, Westpac chief economist Bill Evans expects the Reserve Bank to start cutting interest rates by the end of March 2024.
“While we expect the economy to stagnate in the second half of 2023, there will not be enough progress in bringing inflation on target before the end of 2023 to accommodate earlier rate cuts,” it said.
Westpac now expects seven interest rate cuts in 2024 and 2025 after severe Reserve Bank hikes hit the economy (a Sydney branch pictured)
Westpac had the RBA cut rates by a quarter of a percentage point for the March 2024 quarter, bringing the cash rate down to 3.85 percent.
Another 25 basis point rate cut by the end of June 2024 would bring it down to 3.6 percent before another 0.25 percentage point easing for the September 2024 quarter would bring it to 3.35 percent, where is the cash rate now.
That would be followed by another rate cut in December 2024, bringing the cash rate down to 3.1 percent.
Then there would be four more cuts in 2025, beginning with a 25 basis point easing in the March quarter, bringing it down to 2.85 percent.
Another 0.25 percentage point decline in the June 2025 quarter would take it to 2.6%, followed by another quarter-point decline in the September 2025 quarter to 2.35%.
Those seven rate cuts in 2024 and 2025 would simply put the RBA cash rate back to where it was at the start of October 2022.
Those seven rate cuts in 2024 and 2025 would simply put the RBA cash rate back to where it was at the start of October 2022 (a Sydney auctioneer in early 2021 pictured)
Last year, inflation rose to 7.8 percent, the steepest pace since 1990 and well above the RBA’s target of 2 to 3 percent.
Westpac now expects inflation to fall to 4 percent by the end of 2023 and 3 percent by the end of 2024, “allowing for a policy response to a stagnant economy by the first quarter of 2024.”
The Reserve Bank does not expect headline inflation, also known as the consumer price index, to fall to 3 percent until the June 2025 quarter.
The 3.25 percentage point rate hike in just over nine months has marked the most severe pace of monetary policy tightening since the RBA began announcing a target cash rate in January 1990.
