"Lock in a cut in May"
Australian mortgage-holders could soon see further relief as economists predict an imminent interest rate cut.
Quarterly inflation data, set to be released tomorrow, is forecast to show core inflation falling back within the Reserve Bank of Australia’s (RBA) 2-3% target range, likely leading to a rate reduction at the May 20 meeting.
Economists from the major banks forecast the RBA’s preferred trimmed mean inflation will come in at 2.8 or 2.9% annually. Inflation last breached the target in early 2022, sparking 12 rate hikes over 13 months.
Following a February rate cut to 4.1%, Westpac Group chief economist Luci Ellis (pictured above) stated another 0.25% reduction next month was all but assured. “You can lock in a cut in May, even if the Q1 inflation data is a shade disappointing,” she said.
Westpac expects three cuts this year, including the one in May, with August and November likely to follow. Each 25-basis-point cut is estimated to lower monthly repayments by about $90 on a standard $600,000 home loan.
Speculation has emerged that global uncertainties, driven by US President Donald Trump’s trade policies, might prompt a larger 0.5% cut. However, Ellis dismissed that scenario as unlikely. “If the board were to do something other than cut by 0.25% in May, it might consider a 0.35% move to 3.75%,” she said. “To be clear, we regard this as a very outside chance.”
Another major bank, NAB, offered a different view, preparing for a 50-basis-point cut and predicting the trimmed mean inflation to land at 2.8%. “We think quarterly CPI will largely take a back seat to rising global uncertainty,” NAB said in its latest markets report. “Our base case is that the RBA will deliver a 50bp cut in May to take policy more quickly towards neutral.”
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
