Mortgage Holders Face Longer Wait for Interest Rate Relief
Mortgage-holders may have to wait longer for more interest rate relief after a hawkish turn from the Reserve Bank prompted analysts to push back their expectations for when the central bank will next cut rates. The RBA left the cash rate on hold at 3.6 per cent, in a move widely anticipated by economists and bonds traders.
Reserve Bank’s Hawkish Turn
The accompanying commentary from the bank’s board and governor Michele Bullock was more pessimistic about inflation than expected. After previously anticipating the next cut to come in November, Commonwealth Bank economists pushed back their forecast until February. The RBA board was concerned that, following strong economic activity and consumer price index figures in the lead-up to the meeting, inflation was now set to overshoot their latest forecasts.
Upgraded Forecasts
CBA similarly upgraded its forecast for trimmed mean inflation, the RBA’s preferred measure, to 0.8 per cent in the September quarter. "With a lift in trimmed mean inflation for the quarter and better activity data, led by the consumer and a still resilient labour market, we feel there are enough reasons to see the RBA remain on hold in the two remaining meetings in 2025," CBA head of Australian economics Belinda Allen said.
Analysts’ Reactions
JP Morgan’s Ben Jarman also retracted his call for a November cut, while the money market lowered its chance from more than half to about a third. HSBC chief economist Paul Bloxham also thought the RBA was on the hawkish side, but stuck with his prediction for a move lower in November. "For some time now, we have suggested that while our central case is for two more cuts (in November and February), there is a clear risk of fewer cuts," he said.
Critical Factor
Whether we get a further cut this year will critically hinge on the Q3 CPI print, due on 29 October, being low enough. This suggests that the future of interest rates will depend on the performance of the consumer price index in the third quarter.
Conclusion
In conclusion, the Reserve Bank’s hawkish turn has led to analysts pushing back their expectations for the next interest rate cut. Mortgage-holders may have to wait longer for relief, with some forecasts suggesting that the next cut may not come until February. The future of interest rates will depend on various economic factors, including the performance of the consumer price index. As the economy continues to evolve, it is essential for mortgage-holders to stay informed and plan accordingly.
