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Bendigo Bank economist forecasts stable rates for 2024, cuts in 2025
Bendigo Bank's Chief Economist David Robertson is maintaining his prediction that the Reserve Bank of Australia (RBA) will keep interest rates unchanged throughout 2024, with cuts likely to begin in 2025.
Bendigo Bank economist forecasts stable rates for 2024, cuts in 2025
Bendigo Bank's Chief Economist David Robertson is maintaining his prediction that the Reserve Bank of Australia (RBA) will keep interest rates unchanged throughout 2024, with cuts likely to begin in 2025.
Key points:
- Robertson acknowledges the disappointing May inflation data but cautions against overreacting to a single monthly figure
- He expects the first RBA rate cut to occur in May 2025, pushed back from his previous forecast of February 2025
- Robertson sees a 50% market probability of another rate hike as "a long bow to draw on a single monthly CPI read"
- He notes the importance of upcoming quarterly inflation data and labour force reports in shaping RBA policy
Robertson highlighted several factors influencing the economic outlook:
- Stage 3 tax cuts and cost-of-living measures totalling about $52 billion this financial year
- Uncertainty around how much of this money will be spent versus saved
- Contradictory economic indicators, including record highs in property prices, stock markets, and employment levels, alongside a per-capita recession and low consumer sentiment
The economist expects moderating inflation in the new financial year, aided by base effects and a stronger Australian dollar. He anticipates more moderate gains in house prices but warns that economic uncertainty and geopolitical risks may slow the recovery.
Robertson emphasised the RBA's dual mandate of price stability and full employment, suggesting that upcoming jobs data will be almost as influential as inflation figures in determining monetary policy.
Despite pushing back his forecast for the first rate cut, Robertson maintains his view that the RBA will keep rates on hold for the remainder of 2024, with relief via rate cuts coming in 2025.
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