Australian home borrowers are now being told they will have to wait until next year to get any interest rate relief.
The ANZ Bank has revised its forecasts to have Reserve Bank easing rates in February 2025 instead of November this year as inflation rises again, despite the most aggressive pace of monetary policy tightening since the late 1980s.
The Reserve Bank is widely expected to leave the cash rate on hold at a 12-year high of 4.35 per cent on Tuesday, following a two-day board meeting starting on Monday.
ANZ broke ranks last week to push back its forecasted start date for rate cuts until February 2025.
The most aggressive rate hikes in a generation have already caused monthly variable mortgage repayments to surge by 68 per cent during the past two years.
But Australia is looking less likely to follow the European Central Bank in easing rates soon, meaning more cost of living pain for those with a mortgage.
ANZ on Friday became the first major bank to forecast a delay in Australian rate cuts, after monthly inflation data showed the consumer price index growing by 3.6 per cent in the year to April, up from 3.5 per cent in the year to March.
This showed inflation moving further away from the RBA’s 2 to 3 per cent target, with the 30-day interbank futures market also not expecting any rate cuts until early 2025.
The Commonwealth Bank, Westpac and NAB are all still expecting the easing cycle to begin in November but that could change if price pressures fail to ease.
In addition to the March quarter national accounts, jobs and inflation data, the RBA board also has state and federal budgets and the workplace umpire’s annual minimum and award decision to digest since its last meeting in May.
The latter was unlikely to shift the dial, Mr Aird said, with the Fair Work Commission’s 3.75 per cent rise lining up neatly with the RBA’s expected trajectory for wages growth across the entire workforce.
Energy bill relief and other cost-of-living measures in state and federal budgets had economists asking questions about its inflationary impact, yet recent comments from RBA governor Michele Bullock suggest the central bank would ‘look through’ the one-off impacts on inflation.
The post-meeting statement and press conference with Ms Bullock will be scrutinised closely for clues as to where interest rates might be headed next and how the central bank views the state of the economy.
Of late, the RBA has been leaving its options open on rate moves up or down, preferring not to ‘rule anything in or out’.
ANZ economists were expecting the board to keep that phrasing but were anticipating it would highlight a stronger-than-expected consumer sector.
Australian borrowers are now paying 59 per cent more on their mortgage than they were three years ago – with financial markets now expecting even more rate rises in 2024
The June meeting is set to dominate the economic calendar, although a speech from a central bank official, head of payments policy Ellis Connolly, is also scheduled for Tuesday.
A smattering of economic data releases are also due, including ANZ and Indeed’s job ads data on Monday and Judo Bank’s purchasing managers’ indexes on Friday.
Stocks on Wall Street closed lower on Friday after the US Federal Reserve reduced its projected rate cuts from three to one by year’s end. This ended a four-day run of record closing highs but there were gains in Adobe and other technology shares.
The S&P 500 lost 1.48 points, or 0.03 per cent, to end at 5,432.26 points, while the Nasdaq Composite gained 24.20 points, or 0.14 per cent, to 17,688.88. The Dow Jones Industrial Average fell 57.50 points, or 0.14 per cent, to 38,591.49.
Australian futures fell 17.000 points, or 0.22 per cent, to 19,868.
The benchmark S&P/ASX200 index on Friday finished 25.4 points, or 0.33 per cent, lower at 7,724.3, giving back the bulk of Thursday’s gains.
For the week, the ASX200 lost 135.7 points, or 1.73 per cent, after last week gaining 158 points, or 2.06 per cent.
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