‘Done deal’: Big four bank’s rate call for RBA May | Australian Markets

A May rate cut is a “done deal” for householders based mostly on the latest forecast knowledge popping out of the Commonwealth Bank.

On Tuesday, the CBA launched its latest forecasts which expects headline inflation fall to close the underside of the Reserve Bank of Australia’s goal vary at 2.3 per cent.

CBA is forecasting the all important trimmed imply inflation rate, which the RBA makes use of to make its rate choices, to increase by 0.6 per cent for the quarter to return in at 2.8 per cent for the yr.

This would even be within the RBA goal band of 2 to three per cent.

The bank expects the subsequent quarterly inflation knowledge, which comes out on April 30, will are available beneath the RBA’s forecasts of 0.7 per cent for the quarter resulting in an curiosity rate cut.

“Following the March labour force survey, we think a 25 basis point rate cut in May is still more likely than not if the trimmed mean CPI prints in line with the RBA’s forecast,” CBA senior economist Stephen Wu mentioned.

“If the trimmed mean CPI is in line with our forecast (or below), then we consider a rate cut in May is a done deal.”

If CBA is right with a 25 foundation level rate cut, Canstar figures householders with a $600,000 mortgage would see their month-to-month repayments drop by $91.

While the RBA held the official money rate at 4.10 per cent during the April assembly, it left the door open to future rate cuts.

Australia’s Cash Rate 2022

“Members observed that the May meeting would be an opportune time to revisit the monetary policy setting with the benefit of additional data about inflation, wages, the labour market and trends in economic activity, along with a fresh set of economic forecasts and further information about the likely evolution of global trade policies,” the RBA mentioned.

CBA says the headline inflation will possible rise to 0.8 per cent when the March quarterly figures are launched, on the back of unwinding electrical energy rebates, which beforehand depressed the quantity.

In mid April, NAB had predicted a double rate cut on the RBA May assembly on the back of the turmoil created by US tariffs. However, US President Donald Trump has since paused the tariffs for 90-days.

Westpac additionally predicts the RBA will cut rates of interest by 25 foundation factors, taking the money rate down to three.85 per cent.

Westpac senior economist Michael Gordon mentioned the March quarter inflation figures had been all the time going to be the spotlight, ticking up by barely more than anticipated, however with the small print usually in keeping with its forecasts.

“We expect that headline inflation will remain within the target band over the year ahead, albeit on the higher side – we are forecasting a peak of 2.8 per cent in the December 2025 quarter,” he mentioned.

“We’re now watching to see how the domestic economy responds to the easing in borrowing costs which is working its way through.”

Westpac economist Ryan Wells mentioned the quantity of Australians employed was additionally unlikely to sway the RBA to holding rates of interest in May.

“Labour demand looks to have largely moved in tandem, with employment rising +32k, falling short of expectations,” he mentioned.

“Measures of labour market slack were therefore little changed, with the unemployment rate increasing only 0.01 percentage points.

“Overall, the RBA are likely to see this data as broadly in line with their expectations, still reflecting a degree of ‘tightness’ relative to full employment.”