When interest rates ‘will fall SEVEN times’: Westpac reveals forecast that will give hope to millions of mortgage holders and first home buyers
- Westpac expects seven rates cuts 2024, 2025
- That’s after three rises in March, April and May
Westpac is now expecting seven interest rate cuts in 2024 and 2025 after severe Reserve Bank hikes whack the economy.
Borrowers since May last year have copped nine consecutive monthly RBA rate increases, and Westpac is expecting three more in March, April and May that would take the cash rate to an 11-year high of 4.1 per cent.
But after that, Westpac chief economist Bill Evans is expecting the Reserve Bank to begin cutting interest rates by the end of March 2024.
‘While we expect the economy to stagnate in the second half of 2023 there will not be sufficient progress in bringing inflation into line with the target before the end of 2023 to accommodate earlier rate cuts,’ he said.
Westpac is now expecting seven interest rate cuts in 2024 and 2025 after severe Reserve Bank hikes whack the economy (pictured is a Sydney branch)
Westpac had the RBA cutting rates by a quarter of a percentage point by the March quarter of 2024, taking the cash rate back down to 3.85 per cent.
Another 25 basis point rate cut by the end of June 2024 would reduce that to 3.6 per cent before another 0.25 percentage point easing by the September quarter of 2024 took it to 3.35 per cent – where the cash rate is now.
That would be followed by another rate cut by December 2024, taking the cash rate down to 3.1 per cent.
Then there would be four more cuts in 2025, starting with a 25 basis point easing in the March quarter, taking it down to 2.85 per cent.
Another 0.25 percentage point reduction in the June quarter of 2025 would take it to 2.6 per cent followed by another quarter of a percentage point easing in the September quarter of 2025 that would take it to 2.35 per cent.
Those seven rate cuts in 2024 and 2025 would simply take the RBA cash rate back to where it was in early October 2022.
Inflation last year surged by 7.8 per cent, the steepest pace since 1990 and a level well beyond the RBA’s 2 to 3 per cent target.
Westpac is now expecting inflation to drop to 4 per cent by the end of 2023 and to 3 per cent by the end of 2024 ‘allowing a policy response to a stagnating economy by the first quarter of 2024’.
The Reserve Bank is not expecting headline inflation, also known as the consumer price index, to fall to 3 per cent until the June quarter of 2025.
