New blow to homeowners: Commonwealth Bank rules out rate cuts this year

The Commonwealth Bank now states that there will be no rate cuts before Christmas.

Australia’s largest mortgage lender has revised its forecasts, with the Reserve Bank cutting rates in February rather than November. Minutes from the RBA’s August meeting were released, highlighting that there will be no rate cut in 2024.

Gareth Aird, head of Australian economics at the Commonwealth Bank, said this was bad news for borrowers.

“The August Governing Council minutes show that if economic data develop in line with the RBA’s latest forecasts, the cash rate is likely to remain unchanged for an extended period (i.e. until at least February 2025),” he said.

RBA Governor Michele Bullock said two weeks ago that financial markets were wrong when they predicted rate cuts in November and December.

But minutes of the August 5-6 meeting, released on Tuesday, highlighted that financial markets were dreaming if they thought a rate cut would come this year.

However, members noted that the forecasts were uncertain, the report said.

Importantly, they were also based on a conditional assumption, derived from market expectations, that the cash rate would be cut multiple times over the coming year, starting later in 2024.

The Commonwealth Bank now states that there will be no rate cuts before Christmas

‘Based on what they knew at the time of the meeting, members agreed that monetary policy needed to be tighter than the implied path to bring inflation back to the target level in a sustainable manner within a reasonable time frame.’

The 30-day interbank futures market continues to predict rate cuts in November and December.

The Commonwealth Bank also cut its term deposit rate by 50 basis points last week, a sign that banks have given up competing for savers’ favour.

NAB and ANZ have also cut their term deposit rates.

Governor Michele Bullock said two weeks ago that financial markets were wrong when they predicted rate cuts in November and December