Australian home borrowers are now being told they will have to wait until next year before they get a rate cut.
The ANZ Bank has revised its forecasts for the Reserve Bank to ease interest rates in February 2025 instead of November this year, as inflation rises again despite the most aggressive pace of monetary policy tightening since the late 1980s .
The Reserve Bank is widely expected to leave the cash rate at a 12-year high of 4.35 percent on Tuesday, after a two-day board meeting starting on Monday.
ANZ made a breakthrough last week by delaying the expected start date for rate cuts until February 2025.
The most aggressive rate hikes in a generation have already resulted in monthly variable mortgage payments increasing by 68 percent in the past two years.
But it seems less likely that Australia will soon follow the European Central Bank in easing interest rates, which means a higher cost of living for those with mortgages.
ANZ on Friday became the first major bank to predict a slowdown in Australian interest rate cuts after monthly inflation data showed the consumer price index grew 3.6 percent in the year to April, up from 3.5 percent in the year to March.
This showed that inflation is further deviating from the RBA’s target of 2 to 3 percent, while the 30-day interbank futures market also does not expect any interest rate cut until early 2025.
The Commonwealth Bank, Westpac and NAB all still expect the easing cycle to begin in November, but that could change if price pressures do not ease.
In addition to the national accounts, jobs and inflation data for the March quarter, the RBA board also has state and federal budgets and the workplace umpire’s annual minimum and awards decision to process since its last meeting in May.
The latter is unlikely to push the dial, Mr Aird said, as the Fair Work Commission’s 3.75 per cent increase is neatly in line with the RBA’s expected trajectory for wage growth for the entire workforce.
Utility bill relief and other cost-of-living relief in the state and federal budgets caused economists to question its inflationary impact, but recent comments from RBA Governor Michele Bullock suggest the central bank is considering the one-off impact on inflation would ‘see through’.
The statement after the meeting and press conference with Ms Bullock will be scrutinized for clues about where interest rates might be headed and how the central bank views the state of the economy.
The RBA has recently left its options open for interest rate increases or decreases, preferring to ‘rule nothing in or out’.
ANZ economists expected the board to retain this wording, but expected it would highlight a stronger-than-expected consumer sector.
Australian borrowers are now paying 59 per cent more on their mortgage than three years ago – with financial markets now expecting even more interest rate rises in 2024
The June meeting will dominate the economic calendar, although a speech by a central bank official, payments policy chief Ellis Connolly, is also scheduled for Tuesday.
Some economic data will also be released, including ANZ and Indeed job vacancies on Monday and Judo Bank’s purchasing manager indexes on Friday.
Stock markets on Wall Street closed lower on Friday after the US Federal Reserve cut expected interest rate cuts from three to one by the end of the year. This ended a four-day streak of record highs, but there were gains in Adobe and other tech stocks.
The S&P 500 lost 1.48 points, or 0.03 percent, to end at 5,432.26, while the Nasdaq Composite gained 24.20 points, or 0.14 percent, to 17,688.88. The Dow Jones Industrial Average fell 57.50 points, or 0.14 percent, to 38,591.49.
Australian futures fell 17,000 points, or 0.22 percent, to 19,868.
The benchmark S&P/ASX200 index ended 25.4 points, or 0.33 percent, lower at 7,724.3 on Friday, giving back most of Thursday’s gains.
For the week, the ASX200 lost 135.7 points, or 1.73 percent, after gaining 158 points, or 2.06 percent, last week.