Rate cut possible in early 2025: Boyton

The door to an interest-rate cut in Australia may be further ajar than the market currently expects, according to ANZ Head of Australian Economics, Adam Boyton.

Speaking on the 5 in 5 with ANZ podcast, Boyton said while the Reserve Bank of Australia (RBA) kept rates unchanged at 4.35 per cent at its November meeting, two parts of the now-released minutes could suggest looser policy is closer than expected.

“The first was a sentence discussing the current stance of policy, where the minutes said ‘These observations suggested there was no immediate need to change the cash rate target’,” he said.

“The interesting thing in that sentence is the word immediate, which I think… conveys a slightly different message to if you’d said, ‘There was no need to change the cash rate target, full stop’.

“And then, in the next paragraph, the minutes refer to the need to be forward-looking when it comes to adjusting policy. And so, just taking those things together does suggest that there may be a little door opening there to cash-rate cuts.”

Market bets ahead of the minutes priced rate cuts in from May 2025.

The minutes confirmed economic conditions in Australia have aligned with the RBA’s expectations, as it continues to monitor domestic factors and the international environment.

With the decision to hold rates at 4.35 per cent in November, the RBA has now left rates unchanged for a full year. ANZ continues to hold the view the first cut will happen in early 2025.

“We’re still expecting the first rate cut in February next year,” Boyton said.

“The balance of the data, certainly over the last few months, would suggest the risk of that, or the risk of timing around that, is later rather than sooner. And then the tone from yesterday’s minutes just pulls that risk in a little bit.”

Will Watson is a contributor at ANZ Institutional Insights