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Aussie bank’s dire RBA interest rate prediction: ‘Not in 2024’

Bendigo Bank has pushed back its interest rate cut prediction and says the “possibility of another hike is always there”.

Mortgage holders may need to wait until mid-2025 to get interest rate relief, one of Australia’s biggest banks has warned. Bendigo Bank has forecast the Reserve Bank (RBA) will start cutting interest rates in 2025 “but not in 2024” because of how difficult it is to “eradicate” stubborn inflation.

The bank’s forecast lies in contrast to the Big Four banks - Commonwealth Bank, Westpac, NAB and ANZ - who believe the first cut will come in November this year.

Australian property
Bendigo Bank expects the RBA now won't cut interest rates until early to mid 2025. (Source: Getty)

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“The first cut is now predicted for early to mid-2025,” Bendigo Bank’s chief economist David Robertson said.

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“While the possibility of another hike is always there, and similarly the US are also taking longer to start their easing cycle, we still favour no move up or down from the RBA this year.”

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Strong jobs data, a high unemployment rate and stubborn inflation have led some economists to predict fresh RBA hikes, but Robertson noted that weaker retail sales showed households were doing it tough and cutting back on discretionary spending.

The timing of the first cut will be “at the mercy of the data”, Robertson noted, with slow economic growth and domestic demand expected.

RBA governor Michele Bullock reminded those expecting an interest rate cut in 2024 that she'd not given any indication that would come to fruition when she explained the reasoning behind holding the cash rate last week.

The RBA said it would not hesitate to increase rates if needed, not "ruling anything in or out".

Treasurer Jim Chalmers predicted inflation could return to the Reserve Bank’s target band by the end of 2024, a full year ahead of the central bank's own predictions. That's according to fresh Treasury estimates ahead of the Federal Budget being handed down on Tuesday.

The economics teams at Australia’s Big Four banks all expect the RBA to cut interest rates in November by 0.25 per cent.

Commonwealth Bank and Westpac both pushed back the timing of their RBA rate cut forecasts, following last month's stronger-than-expected inflation results.

Both major banks had previously forecast cuts for September, but this has now moved to November. NAB and ANZ’s forecasts remain unchanged however, ANZ said there is a risk the cuts might not happen until later.

The RBA left the cash rate on hold at a 12-year high of 4.35 per cent this month. The board warned that the economic outlook “remains uncertain” and that “the process of returning inflation to target is unlikely to be smooth”.

Annual inflation slowed to 3.6 per cent in March, down from 4.1 per cent over the year to December. This was higher than the 3.5 per cent rise expected by economists. Unemployment is still low at 3.8 per cent.

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