CBA’s major RBA interest rate cut prediction
CBA believes we have hit the peak of interest rate hikes.
Commonwealth Bank (CBA) has updated its interest rate prediction, and it’s positive news for borrowers struggling to keep up with rising mortgage repayments.
CBA head of Australian Economics Gareth Aird said he believed interest rates were now at their peak - meaning they would not climb further from here.
However, Aird said there was a small chance the Reserve Bank (RBA) could hike rates again.
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“At this stage, we don’t consider the June board meeting ‘live’, and expect the cash rate to be left on hold,” Aird said.
“Our central scenario puts the current 3.85 per cent as the peak in the cash rate, while the near-term risk sits with another rate hike.”
So, when will interest rates fall?
Aird said the major bank was expecting a fall of 0.50 per cent in the final three months of the year, and a further 0.75 per cent worth of cuts throughout 2024 - bringing the cash rate to 2.6 per cent.
So, that would mean interest rates would be on hold until around September this year and would be cut from there.
What would push the RBA to increase rates again?
Aird said it would come down to the data - primarily unemployment, inflation and wages.
“Our take on the current forward guidance from the [RBA board] minutes today - that ‘members also agreed that further increases in interest rates may still be required, but that this would depend on how the economy and inflation evolve’ - is that the board is willing to raise the cash rate again in this cycle,” he said.
“But another rate increase would require the economic data - particularly around inflation, GDP, the unemployment rate and wages/unit labour costs - to come in stronger than the RBA’s updated forecasts.
“Put another way, we do not think the RBA will lift the cash rate again if the economic data prints in line or weaker than their forecasts.”
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