The Australian Financial Review’s survey of 36 economists puts the first post-pandemic rate cut in play by February 2024, a quarter tip it could happen this year.
A slowdown in growth and inflation, and the imminent arrival of a global easing tide by central banks, will allow the Reserve Bank to cut interest rates early next year if it can get sufficient comfort that the prospect of a feared wage spiral has been eliminated.
Unlike economists who are not giving up on the chance of a rate rise this week, financial markets imply a 91 per cent chance the RBA will hold the cash rate at 3.6 per cent on Tuesday.Rates traders also anticipate the arrival of the first rate cut in March next year, roughly in line with surveyed consensus.
For Tim Toohey, head of macro and strategy at Yarra Capital Management, household spending is the key element.“Most importantly, consumption growth is clearly slowing well before the worst of the impact of the prior interest rate hikes have hit, and we expect retail sales will contract in annual terms through to the end of 2023.”
He expects the first easing to arrive early next year once the RBA is comfortable that core inflation will be back at the top of its target range by the end of next year.Jo Masters: “We remain cautious about the persistence of inflation, in particular wage growth and rents, which suggests the RBA will need to hold restrictive policy for some time.”“This will be confirmed with the release of the December quarter CPI report in late January 2024,” Mr Hogan said.
The median forecaster assumes core inflation slowing to 4.1 per cent by Christmas, from 6.9 per cent now, and just under the RBA’s projected level of 4.3 per cent.
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