Commonwealth Bank of Australia (CBA) economists have pushed back their predictions for when the Reserve Bank of Australia (RBA) will reduce the cash rate. It was the only remaining of the big four banks anticipating a rate cut in September, but inflation isn’t falling fast enough and now interest rate cuts aren’t expected until November or even 2025.

A leading economic forecaster issued a dire warning last week that the RBA could be forced to up the cash rate three times this year. But CBA’s head of Australian economics, Gareth Aird, said Australia's biggest bank predicts it will stay on hold.

“The near‑term risk sits with an interest rate hike. But we expect the RBA to be on hold over the next six months given the economy is still contracting on a per capita basis, inflation is forecast to fall further, and the labour market is anticipated to loosen,” Aird said.

Do you have a story to tell? Contact yahoo.finance.au@yahooinc.com

“Our base case now sees the RBA commence an easing cycle in November 2024 (from September 2024 previously).”

When will interest rates come down?

The central bank is set to meet on May 6 to determine the cash rate. CBA, NAB, ANZ and Westpac all predict it will be held at 4.35 per cent.

Tuesday’s change puts CommBank inline with the other big four banks' 2024 forecasts after Westpac adjusted its prediction last week off the back of hotter-than-expected quarterly inflation data.

The CBA had predicted three 0.25 percentage point cuts, but is now only factoring in one.

Big Four banks’ interest rate predictions for 2024:

• CBA: One cut in 2024 with the first in November

• Westpac: One cut in 2024 with the first in November

• NAB: One cut in 2024 in November

• ANZ: One cut in 2024 in the fourth quarter

Aird noted the housing crisis was putting pressure on Australia’s attack on inflation.

“We believe that incredibly strong population growth, driven by net overseas immigration, has put upward pressure on some important components of the Consumer Price Index (CPI) basket; most notably the housing‑related components. As a result, demand is stronger and so inflation is falling less quickly than otherwise,” Aird wrote.

“The upshot is the monetary policy will need to stay at a restrictive setting for longer to bring inflation back towards the mid‑point of the RBA’s target band.”

How many interest rate cuts are predicted for 2025?

CommBank, Westpac and NAB predict the cash rate will drop 1 per cent in 2025, over four 0.25 basis point cuts.

ANZ is not as optimistic, forecasting just two cuts of 0.25 percentage points.