What to expect from the RBA meeting in November 2024

In the minutes of its previous meeting in September 2024, the RBA Board acknowledged that “financial pressures from persistent inflation and restrictive monetary policy meant many households were having to make difficult adjustments to their spending and financial arrangements.” However, not enough had changed since the previous meeting to alter their assessment that the current cash rate best balanced the risks to inflation and the labour market.

Looking to the future, the RBA Board considered what factors could mean the cash rate would need to be kept on hold for longer. It was discussed if further tightening would be required, such as if financial conditions turn out to be insufficiently restrictive to return inflation to target. There was also discussion around if there were scenarios where future financial conditions might need to be less restrictive than they were at present.

Ultimately, the Board agreed that it was not possible to either rule future changes to the cash rate in or out, and that its future decisions would be guided by the appropriate data and risk assessments.

According to Federal Treasurer, Jim Chalmers, while the latest inflation figures have fallen within the RBA’s target band for the first time since 2021, this doesn’t automatically mean that Australia’s cost of living crisis is over:

“We recognise people are still under pressure, but we are making very welcome, very encouraging, very substantial progress in the fight against inflation... we’ve made good progress but we don’t pretend that getting those inflation numbers down, even though we’ve been able to get them down substantially, we know that that doesn’t mean that the pressure is suddenly eased or lifted.”

The Treasurer also reaffirmed his stance not to pre-empt the RBA’s monetary policy decisions, which will be based on a range of considerations including inflation, jobs, the construction market,  what’s happening around the world and more.

ANZ senior economist, Catherine Birch, has made it clear that the Q3 CPI data points to a 2025 rate cut. Despite headline inflation falling within the RBA’s target band, trimmed mean inflation is still too high for the RBA to immediately start tapping the brakes on interest rates:

"We do not think the decline in trimmed mean inflation will be enough to convince the RBA it should begin the easing cycle this year, particularly as there does not appear to be an urgent need to support the labour market, given its resilience over recent months."

ANZ is sticking to its forecast for a 25-point rate cut in February 2025, though this could potentially be delayed if inflation or labour market figures do not respond as predicted in the coming months.

While Commonwealth Bank had been the last major bank predicting a rate cut before the end of 2024, it has changed its tune following the latest CPI figures and is now forecasting a 2025 cut.

CBA economists, Gareth Aird and Steven Wu, said that this change should not come as a surprise, as the previous forecast for a December 2024 rate cut was always conditional on a Q3 2024 trimmed mean CPI of 0.7% per quarter or less – and this figure came in just too high at 0.8%.

“The shift downward in inflation has been a bumpy ride as observed by the swings in the quarterly changes in underlying inflation.  But this is to be expected.  The disinflation process is never a smooth one on a quarterly basis.  Overall the glide path of returning underlying inflation to the target band is intact.” 

Assuming disinflation continues over the rest of 2024, CBA is now forecasting that the RBA will cut the cash rate by 25 basis points in February 2025.

NAB’s prediction had previously been for a rate cut as late as May 2025. However, at the end of September 2024, NAB brought its forecast forward to February 2025, predicting that that trimmed mean inflation will fall from 3.5% in 2024 to 2.6% in 2025 – within the RBA’s target band.

“…the balance of risks has likely shifted sufficiently for the RBA to feel comfortable cutting a little sooner than we earlier expected.”

That said, NAB acknowledged that the RBA’s cuts are likely to be later and shallower than those of some other central banks around the world.

Following the release of the September quarter CPI figures, Westpac chief economist, Luci Ellis, said “rate cuts from February still seem the most likely path for the RBA.”

“All of this suggests that risks of a further rate hike have faded, but neither do recent data imply that rate cuts need to be brought forward from our current expectations. Given the uncertainties surrounding the US election and its aftermath, we think it likely that the RBA will stand pat this time and see how global events play out. Thus the view that rate cuts will commence in February remains appropriate.”

Ms Ellis also considered what it would take for the RBA to jump the gun and cut the cash rate early in December 2024. If in the next few months a major shock caused Australia’s economy to hit a wall, it could potentially shift the RBA’s thinking on the timing of rate cuts, though this would be a low-probability outcome.

To help you stay up to date with the latest updates to the national cash rate, as well as the changes to interest rates on home loans and savings accounts that follow, be sure to visit the RateCity RBA Rate Tracker hub.