Australians are being warned not to expect interest rate cuts before Christmas, even as pressure mounts on the Reserve Bank to start cutting.
The country’s central bank meets Tuesday to set the cash rate, which many experts predict will remain unchanged at 4.35 percent.
After the US Federal Reserve cut its key interest rate by half a percentage point, the RBA is under increasing pressure to do the same and bring forward mortgage interest relief.
However, economist Saul Eslake predicted that a rate cut would not come until February 2025 unless the numbers showed something unexpected.
“I really don’t see why they would do that any earlier unless underlying inflation falls much faster than expected,” he told AAP.
‘While headline inflation will fall (mainly as a result of electricity bill reductions by the federal government and some state governments), underlying inflation is still likely to be close to 3.5, well above the Reserve Bank’s target for cutting interest rates.’
Data from the Australian Bureau of Statistics released earlier in September showed the unemployment rate was stable at 4.2 percent in August.
The monthly consumer price index will be published on Wednesday.
The RBA is under pressure to cut rates, but a leading economist thinks this is unlikely in 2024. Pictured: RBA Governor Michele Bullock
Graham Cooke, head of consumer research at Finder, was more optimistic about the likelihood of a cut in November.
“If it goes ahead it will be an early Christmas present for households in Australia,” he said.
Finance Minister Jim Chalmers has previously criticised the central bank’s interest rate policy for contributing to the prolonged decline in Australia’s GDP per capita.
The government hopes for tax cuts before the 2025 elections.
Prime Minister Anthony Albanese affirmed the RBA’s independence, while the Greens urged the government to intervene and cut interest rates.
Mr Albanese said the Labour Party continued to support changes recommended in a review of the central bank, including removing the power of the finance minister to overrule the Reserve Bank’s decision.
“These are important reforms to strengthen the independence of the RBA and ensure that the RBA is fundamentally fit for the role it needs to perform in the future,” the prime minister told reporters in Canberra on Monday.
According to Mr Albanese, the government is doing its best to reduce high inflation, the underlying cause of high interest rates.
