Expect 2 cuts and a 3.85% cash rate in 2025, says ANZ

  • December 18, 2024
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The major bank has made its prediction as to what the cash rate will drop to following predicted cuts.

ANZ Research Quarterly released recently, highlighting trends for the first quarter of FY 2024–25.

According to the data, the lender is predicting a fall in the cash rate this financial year, dropping from the current 4.35 per cent to 3.85 per cent. This will hold through the FY2025–26, said ANZ.

These cuts will be comprised of one in May 2025 and another in August, said the report.

“On the outlook for monetary policy, we expect only two rate cuts from the RBA next year. That shallower rate cut cycle reflects the broad resilience of the economy to date, including in the labour market,” the report said.

“With the labour market having been more resilient than we expected, we have shifted the start of the RBA’s easing cycle from February 2025 to May 2025. We expect only two rate cuts of 25 bp each.”

Despite the prediction for a May rate cut, ANZ noted that there is still the possibility of a February change.

“If the Q4 CPI provides the RBA board with sufficient comfort that inflation will sustainably return to the band and if the labour market softens a little. The risks of a cut in early 2025 have also risen following the most recent RBA meeting and post-meeting statement,” ANZ said.

Meanwhile, the report said that the global economy will again avoid recession in the coming year, with rate cuts expected to help economies stabilise.

“Banking sector delinquencies are generally low, underlying demand supported by government imperatives and private sector balance sheets sound. This implies the pace of rate cuts in the early and more aggressive cutters, particularly the US and New Zealand, will ease off in 2025. But even the euro area and UK, which both face structural headwinds, are likely to see a positive growth response from the easing cycle. Australia is still likely to cut rates, but only modestly,” ANZ said.

ANZ highlighted three key themes that are likely to influence worldwide economies in the coming year:

  1. The general health of private sector balance sheets implies a low risk of recession.
  2. The Trump presidency will be more disruptive rather than destructive.
  3. China’s stimulus will remain largely structural.

Domestically, ANZ believes there will be some stabilisation in the economy. A big influencer is consumer confidence, which the report said “indicates a nascent but ongoing recovery.” Stage three tax cuts certainly helped to boost confidence and ANZ noted will continue to recover through early 2025.

Resource: brokerdaily.au