Two of Australia’s largest banks declare rate hikes OVER as inflation eases
- Westpac and NAB say rate hikes are over
- Commonwealth Bank, ANZ see one rise
Two of Australia’s Big Four banks have now declared an end to the Reserve Bank’s rate hikes.
Westpac and National Australia Bank now expect cash rates to hold an 11-year high of 3.6 percent on Tuesday.
The 30-day interbank futures market also predicts an end to the cycle of interest rate hikes.
The Commonwealth Bank, Australia’s largest home lender, forecasts a final 0.25 percentage point increase on May 2, bringing it to 3.85 percent.
ANZ also expects another quarter with a percentage point increase, but in August.
Westpac chief economist Bill Evans said inflation was already on track to moderate to three percent by mid-2025, justifying the Reserve Bank to halt its rate hikes.
“This gives the board more room to extend the pause we saw in April,” he said.
Two of Australia’s Big Four banks have now declared an end to the Reserve Bank’s rate hikes. Westpac and National Australia Bank now expect the cash rate to hold Tuesday at an 11-year high of 3.6 percent
“We’ve always argued that May would likely be the peak of the tightening cycle, so we’re now lowering our forecast cash rate peak from 3.85 percent to 3.6 percent.”
RateCity research director Sally Tindall said a May break seemed more likely.
“It will be an extremely close call at next Tuesday’s meeting, but the odds are stacking in favor of a break,” she said.
Australia’s inflation rate in the year to March slowed to 7 percent, down from a 32-year high of 7.8 percent in December.
While the consumer price index is well above the RBA’s target of 2 to 3 percent, commodity inflation has slowed.
Footwear and clothing prices fell 2.6 percent in the March quarter, before growing at a more moderate annual rate of 3.2 percent.
The Reserve Bank’s 10 consecutive rate hikes from May 2022 to March 2023 marked the most severe pace of monetary policy tightening since the target rate era began in January 1990 (Photo: Governor Philip Lowe)
The 30-day interbank futures market also predicts an end to the cycle of interest rate hikes.
The Reserve Bank’s 10 consecutive rate hikes from May 2022 to March 2023 marked the most severe pace of monetary tightening since the start of the target interest rate era in January 1990.
The April break was the first month without an increase in a year.
Mr Evans said the RBA is likely to maintain its tightening bias, with it more likely to raise rates than cut them in 2023 as the real estate market stabilized and high immigration boosted consumer demand.
But he said retail spending is likely to weaken in the March quarter as a result of past rate hikes.
“On the other hand, our already very weak household spending profile could be further reduced,” Evans said.
Ms Tindall said borrowers were still adjusting to the wave of interest rate hikes, with ultra-low two per cent fixed rate mortgages due to expire in 2023.
“For the RBA, the paramount fact is that some households have not yet started paying for the February raise, let alone the March one,” she said.
“Households are still catching up with these rate hikes, rather than catching their breath.”