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RBA expected to hold interest rates as experts warn cuts may not come until 2025

CBA, Westpac, ANZ and NAB believe the RBA will start cutting rates in the second half of the year, but other experts think it won't come until 2025.

The Reserve Bank (RBA) is expected to keep interest rates on hold at 4.35 per cent when it meets this week, in a “straightforward” decision for the central bank.

All 41 experts surveyed for Finder’s latest RBA Cash Rate Survey believe the central bank will hold rates steady in March - but they are split on when rates will start coming down.

Half have forecast the RBA will make its first cut before September, while the other half believe it will come later. One in four experts thinks the RBA won’t start cutting rates until 2025.

RBA governor Michele Bullock and people
Interest rates are expected to be kept on pause when the RBA meets this week. (Source: AAP/Getty)

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With inflation remaining steady at 3.4 per cent in the 12 months to January, Finder head of consumer research Graham Cooke said the cost-of-living crisis may be nearing its end.

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“With inflation continuing to reduce, it seems the RBA’s rate hikes are having the desired effect,” Cooke said.

“The question is now not if the RBA will cut rates – but when?”

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So, when will interest rates come down?

Commonwealth Bank and Westpac predict the first interest rate cut will come in September 2024. NAB believes the first cut will come in November 2024, while ANZ thinks it will happen in the fourth quarter of the year.

Commonwealth Bank head of Australian economics Gareth Aird said the RBA would leave the cash rate unchanged this week in a “straightforward decision”. The bank is forecasting three rate cuts in total in late 2024, followed by another three rate cuts in the first half of 2025, which would take the cash rate to 2.85 per cent.

Moody’s Analytics economist Harry Murphy Cruise expects the RBA won’t loosen monetary policy settings until September, at the very earliest.

“The Reserve Bank Board will want to consider the impact of a third round of tax cuts that will take effect in July. While the cuts won’t derail inflation’s retreat, they will delay it,” Cruise said.

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AMP chief economist Shane Oliver thinks the RBA will start cutting interest rates in June, with three 0.25 per cent cuts expected this year.

"The RBA is likely to still be waiting for more confidence, regarding the fall in inflation, at its March meeting,” Oliver said. “But the combination of slowing growth, rising unemployment and falling inflation should see it in a position to start cutting at its June meeting - if not then, in August.”

Bendigo Bank chief economist David Robertson thinks the RBA will retain its tightening bias in March before moving to a neutral position in May, with no rate cuts until November at the earliest.

“A more patient approach, delivering five cuts next year, remains our base-case forecast, while earlier cuts (in spring) may only result in a couple of cuts,” Robertson said.

The RBA started hiking interest rates from record low levels of 0.1 per cent in May 2022, with 13 rate hikes taking it to the current 4.35 per cent.