Cup Day rate cut off the table for all majors

Ahead of the Reserve Bank of Australia’s (RBA) September monetary policy meeting, the Commonwealth Bank of Australia (CBA) has become the last major bank to shift its rate cut call away from the November meeting.

In an update by CBA head of Australian economics Gareth Aird, the major bank’s economist said that while the base case for an easing cycle to begin is still pencilled in for 4Q24, the call has been changed to the December meeting.

This followed the release of the August Labour Force data by the Australian Bureau of Statistics (ABS), which revealed that the unemployment rate had held steady at 4.2 per cent.

Aird said: “We continue to expect a more pronounced softening in the inflationary pulse over 3Q24 compared to the RBA. The already released private prices gauges for August underpin this view. And we anticipate the August monthly CPI indicator will step down materially to 2.7 per cent per year.

“But the August labour market data was stronger than we expected. Employment rose by a robust 47,500 over the month and the unemployment rate held at 4.2 per cent. We had forecast a lift in the unemployment rate to 4.3 per cent.”

Along with the unemployment data, the “relatively hawkish rhetoric” from RBA governor Michele Bullock created a more likely scenario that the easing cycle would commence in December, according to Aird.

In regard to the upcoming September decision, Aird said that the cash rate will be held at 4.35 per cent in a “straight forward decision”, in line with the predictions of other bank economists.

While hopes of a November rate cut appear to be now out of reach, CBA is still the only major bank expecting a rate cut to occur in 2024.

ANZ, NAB, and Westpac have all pushed back their rate cut calls until the first or second quarter of 2025.

ANZ’s economist team said that it continues to expect the RBA to start its easing cycle in February 2025; however, the “risks look to have tilted to a later rather than an earlier start, particularly given the current momentum in the labour market”.

Westpac followed with its adjustment to 2025, also expecting a rate cut to occur in February 2025 before eventually reaching 3.35 per cent by December of that year.

NAB’s economics team has predicted May 2025, three years on from the first rate hike in this cycle, to be the most likely month for a reduction; however, it said that this could happen “anytime from February”.

[RELATED: The Fed slashes rates - will the RBA follow suit?]

Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

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