Westpac has become the latest financial institution to forecast that the Reserve Bank of Australia (RBA) might reduce interest rates as soon as next month. In May, RBA Governor Michele Bullock stated that the board intended to refrain from consecutive cuts and would await quarterly inflation data before the August meeting.
Following the Commonwealth Bank’s recent update predicting a rate cut in July, Westpac has echoed this sentiment, with Chief Economist Luci Ellis now anticipating the RBA’s next rate reduction in July instead of August. Ellis remarked that while monthly inflation figures typically do not alter the RBA’s decision-making process, they could make it difficult to justify maintaining rates in July only to cut them in August.
Ellis suggested that the RBA is likely to proceed with a rate cut sooner rather than later, implying that the argument for delaying the decision is becoming increasingly tenuous. He noted that ongoing uncertainties in the economy and concerns regarding the tight labour market would likely result in the RBA’s communication being cautious and somewhat reluctant about the cut.
With the forecasts now aligning, Westpac, Commonwealth Bank, and NAB are all projecting an interest rate decrease in July, while ANZ maintains its prediction for August. Homeowners could see significant reductions in their monthly repayments if the RBA implements a 0.25 per cent cut; for example, those with a $600,000 mortgage might save around $90 monthly. Likewise, a $750,000 mortgage holder could save approximately $113, and a $1 million loan holder could see a reduction of $150.
Canstar’s Data Insights Director, Sally Tindall, noted a “strong chance” of the cash rate dropping to 3.60 per cent, but emphasised that the RBA would need to consider a variety of mixed data and the current global economic tension.
Following the anticipated July meeting, the major banks expect further rate reductions in the months ahead. Westpac is the most optimistic, predicting four cuts from July to May, reducing the rate to 2.85 per cent. NAB expects three cuts, bringing the rate to 3.10 per cent, while Commonwealth Bank and ANZ forecast two cuts, leading to a rate of 3.35 per cent.
As the economic landscape continues to evolve, these predictions highlight the increasing likelihood of changes in interest rates that could benefit Australian homeowners.