AUS
NZ
UK
CA
USA
IND
Highlights
- ANZ (ANZ) anticipates an Australian rate cut as early as February.
- Core inflation is expected to hit its lowest since 2021, driving this forecast.
- January 29 inflation data could influence the Reserve Bank of Australia’s decision.
ANZ (ASX:ANZ) has joined Macquarie in moving forward the projected timing of the Reserve Bank of Australia's (RBA) next rate cut, now forecasting it to occur in February instead of May. This shift is based on recent inflation and retail sales data that strengthen the case for an early monetary policy adjustment.
Core inflation, which is the RBA’s preferred metric, is anticipated to rise only 0.5% quarter-on-quarter in the fourth quarter of 2024. Should this projection hold, it would mark the smallest quarterly increase in core inflation since 2021, reducing the annual rate to 3.2% from the current 3.5%. Additionally, the new forecast places the inflation rate below the RBA's expected annual projection of 3.4%.
ANZ's analysis comes ahead of the official inflation data release scheduled for January 29. Should the anticipated figures align with expectations, they could prompt the RBA to announce a 25-basis-point reduction in the cash rate at its February meeting.
Macquarie (ASX:MQG) also revised its expectations earlier this week, mirroring ANZ’s revised timeline for an RBA rate cut. Both financial institutions suggest that the slowing inflation trajectory, coupled with broader economic indicators, supports earlier action to stimulate economic activity.
The forthcoming inflation report will be a critical determinant in shaping the RBA's February decision. Recent data suggests that rising prices and softer retail figures may give the RBA sufficient reason to implement a rate cut sooner than originally planned.
By projecting a reduced rate environment, institutions like ANZ and Macquarie align their analyses with Australia’s slowing inflationary pressures. This not only shapes market expectations but also sets the stage for potential shifts in the broader economic landscape as policymakers weigh their options.
Market participants are now keenly focused on the January 29 data release to assess whether the forecast holds, potentially influencing Australian households and businesses' borrowing costs in the months ahead.
