Big 4 banks revise interest rate predictions in response to RBA’s ‘risk averse’ thinking

The big four banks have made predictions on the interest rate cuts homeowners can expect going into 2025 – and they’re split right down the middle. With expert predictions of rate cuts amounting to at least 25 basis points in 2024 proving wrong, CBA, Westpac, NAB and ANZ are in two different minds heading into 2025. While all four banks initially anticipated mortgage relief for millions in the form of a February 2025 rate cut, economists at Westpac and most recently NAB have broken away from the pack, with neither bank expecting the Reserve Bank of Australia (RBA) to move rates until May. CBA and ANZ are forecasting that the RBA will begin cutting rates in February, while Westpac and NAB are anticipating rates to remain the same until May. “We now expect consecutive 0.25 per cent cuts at the RBA’s board meetings in May and July,” wrote Westpac economist and former RBA assistant governor Luci Ellis. Adding that “recent RBA communication suggests that they are more comfortable with the later date”, Ms Ellis said that outcome “would follow a similar pattern to what we’ve seen from international peers including the Federal Reserve and RBNZ and mark an acceleration from our previous forecast of one cut per quarter”. While CBA is still predicting a February cut, CBA head of Australian economics Gareth Aird has warned mortgage holders that’s likely to change if the RBA board decides it wants to see more than just one good quarter of consumer price index conditions before making a move. “If the governor confirms that is indeed the case, then a rate cut has effectively been ruled out until May 2025 at the earliest,” Mr Aird said. New data released on Wednesday showed that inflation had dropped to 2.1 per cent in October, placing it within the RBA’s target rate for the first time in 3½ years. The International Monetary Fund’s latest outlook anticipates that Australia’s inflation rate will climb to 3.6 per cent by the end of next year.