Economists are increasingly optimistic that mortgage holders and small businesses will receive much-anticipated interest rate relief soon. The ASX200 recently closed at 8447 points, a rise of 0.57 per cent, buoyed by heightened expectations of a cash rate cut in February.
Market indicators now suggest a 92 per cent probability of a rate reduction on February 18, up from 84 per cent, following recent inflation data. Westpac has revised its earlier forecast, now predicting a cut in February instead of May, with Chief Economist Luci Ellis noting that disinflation appears to be occurring faster than the Reserve Bank of Australia (RBA) had anticipated.
While most major banks align with this prediction, NAB remains the only major institution still expecting a cut in May. Analysts caution that despite the potential for a rate cut, the RBA might maintain its current rates, arguing that supply still trails demand. Additionally, AMP’s Deputy Chief Economist, Diana Mousina, emphasises that while unemployment hovers at 4 per cent, stagnant wage growth and disappointing GDP figures suggest a need for economic support.
Overall, there is a growing consensus among economists that the RBA is likely to lower the cash rate in the upcoming month, aligning with investor sentiments and current inflation trends.