Interest rate cut in 2024 and 2025 to counteract negative effects of RBA rate hikes
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Interest rate cut in 2024 and 2025 to counteract negative effects of RBA rate hikes

Westpac has forecasted that the Reserve Bank will make seven interest rate cuts in 2024 and 2025 to counteract the negative effects of recent RBA rate hikes.

Borrowers have been subject to nine consecutive monthly RBA rate increases since May 2021, and three more rate hikes are expected in March, April, and May 2022, taking the cash rate to an 11-year high of 4.1%.

Westpac Chief Economist Bill Evans believes that after these hikes, the Reserve Bank will begin cutting interest rates by March 2024.

While he expects the economy to stagnate in the second half of 2023, he also believes there will not be sufficient progress in bringing inflation in line with the target before the end of 2023 to accommodate earlier rate cuts.

Westpac predicts that the RBA will reduce rates by a quarter of a percentage point by the March quarter of 2024, taking the cash rate back down to 3.85%, followed by another 25 basis point rate cut by the end of June 2024, reducing it to 3.6%.

Another 0.25 percentage point easing by the September quarter of 2024 would take it to 3.35%, the current cash rate.

The bank then predicts another rate cut by December 2024, taking the cash rate down to 3.1%. Four more cuts are expected in 2025, starting with a 25 basis point easing in the March quarter, taking it down to 2.85%.

Another 0.25 percentage point reduction in the June quarter of 2025 would take it to 2.6%, followed by another quarter of a percentage point easing in the September quarter of 2025 that would take it to 2.35%.

These seven rate cuts in 2024 and 2025 would bring the RBA cash rate back to where it was in early October 2022.

While borrowers have recently been subject to rate hikes, Westpac’s forecast offers hope to millions of mortgage holders and first-home buyers.


»Interest rate cut in 2024 and 2025 to counteract negative effects of RBA rate hikes«

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