Yahoo Finance CBA’s major RBA interest rate prediction for 2024
Commonwealth Bank is expecting 0.75 per cent in rate cuts for mortgage holders in 2024.
Commonwealth Bank (CBA) is now forecasting six interest rate cuts in 2024 and 2025, as inflation eases quicker than expected.
CBA’s chief economist, Stephen Halmarick, is expecting the Reserve Bank (RBA) will start cutting interest rates in September 2024, reducing the cash rate by 0.75 per cent in total by the end of the year.
This will then be followed by another 0.75 per cent worth of cuts in 2025, as the bank predicts inflation will come back into the RBA’s 2-3 per cent target range ahead of forecast.
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This would bring the cash rate down from its current 12-year high of 4.35 per cent to 3.6 per cent by the end of 2024, and down to 2.85 per cent by the end of 2025.
Interest rates have skyrocketed from a record low of 0.10 per cent to 4.35 per cent since May 2022, adding $1,349 more per month to $600,000 mortgage.
A 0.75 per cent interest rate cut would save a borrower with a 7 per cent mortgage interest rate and a $600,000 home loan over 30 years about $298 a month on their repayments. The total 1.5 per cent interest rate cut would save the same borrower about $585 a month.
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“CBA is forecasting the annual rate of inflation back at 3 per cent at the end of 2024, well ahead of the RBA’s current forecast and closer to the Commonwealth government’s latest forecast,” Halmarick said.
“We also expect the RBA to begin a modest monetary policy easing cycle from September 2024 onwards.”
The RBA is currently forecasting inflation to fall back into its target range by the end of 2025. Treasury is forecasting the inflation rate will be at 2.75 per cent by the 2025 June quarter. Annual inflation was 4.9 per cent in October, down from 5.6 per cent in September.
Halmarick also expects employment growth to remain positive in 2024, but predicts the unemployment rate will increase from the current 3.9 per cent to 4.5 per cent by the end of 2024.
He stressed that no one needed to lose their job for the unemployment rate to rise. Instead, all that’s required is for job growth to be slower than the increase in the working-age population.
Looking at property prices, Halmarick expects prices will rise by a further 5 per cent in 2024, following 9.6 per cent growth since the trough in February 2023.
A slowdown in net migration and measures to increase the supply of new homes will also be “critical to restoring some balance to the Australian housing market”.
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