CBA pares back cash rate cut prediction to just one in 2024

Key takeaways

Australia’s biggest bank, CBA, has revised its cash rate forecast, reducing the number of predicted RBA cuts in 2024 from three 0.25 percentage point cuts to just one, scheduled for November.

Last week Westpac e updated the bank’s cash rate forecast, reducing the number of predicted cuts from two to one.

Australia’s biggest bank, CBA, has revised its cash rate forecast, reducing the number of predicted RBA cuts in 2024 from three 0.25 percentage point cuts to just one, scheduled for November.

This decision comes on the back of stronger-than-expected inflation data from the ABS last Wednesday.

Last week, Westpac’s economic team also updated the bank’s cash rate forecast, reducing the number of predicted cuts from two to one.

As a result, all big four bank economic teams now predict there will be just one cash rate cut in 2024 at the RBA’s November meeting.

Current Big Four bank cash rate forecasts

Source: RateCity.com.au. Forecasts are current as of 30/04/2024.

Plan for a hike, rather than a cut

While the big four banks are aligned in their prediction for the RBA’s next move, wider recent economic commentary warns the next move from the RBA could be up rather than down.

Reserve Bank Governor, Michele Bullock, made it clear following the RBA’s March meeting that the Board “cannot rule anything in or out”.

Therefore, prudent borrowers should plan for a hike, just in case.

Potential impact of a 0.25% pt hike on monthly repayments

Based on a borrower who has not renegotiated their loan since the start of the hikes

Source: RateCity.com.au. Based on an owner-occupier paying principal and interest with 25 years remaining who has not renegotiated since the start of hikes. Starting rate is the RBA avg. existing owner-occupier variable rate of 2.86% in April 2022.

RateCity.com.au research director, Sally Tindall, said: “What these cash rate forecasts tell us is that no-one, not even the RBA knows what its next move is.”

“While we’ve made excellent progress bringing down inflation, there’s every chance this next leg of the battle could be the hardest,” she said.

“You only have to look at the monthly CPI indicator to see signs of stickiness, with the data showing three months of stagnation, followed by a small rise to 3.5 per cent.

“The RBA is not going to revert back to hiking the cash rate without plenty of data on its side, and plenty of warning to borrowers. However, if you’ve got a mortgage, it’s prudent to plan for a hike just to be on the safe side.

“One way to do this is to call your bank and ask for a rate cut. Even a relatively minor 0.25 percentage point cut is enough to cushion the blow of another rate rise, especially if you can pocket the rate reduction as quickly as possible and keep your monthly repayments the same to help build a buffer,” she said.

ABS Consumer Price Index, Australia - annual movement

Source: ABS Consumer Price Index, Australia. Quarterly CPI and Monthly CPI.

About Sam Alaaeddin With well over a decade's experience in asset and wealth management, Sam is an Elite Wealth Planner at Metropole and leverages his expertise to help clients achieve their wealth management goals. He holds a bachelor’s degree in law and commerce (Finance) and a Diploma in Financial Planning.