Inflation is expected to be back within the RBA’s 2-3 per cent target band in the second half of 2025.Credit:Peter Rae
The Reserve Bankthis week held the official cash rate at 4.1 per cent,signalling it believes the economy is on its way to a soft landing. It will on Friday provide updated forecasts for growth,inflation and unemployment over the coming two-and-a-half years.
Governor Philip Lowe,who will face his final grilling by the House of Representatives economics committee next week beforehanding over to his deputy,Michele Bullock,has already revealed that inflation is expected to be back within the RBA’s 2-3 per cent target band in the second half of 2025.
The slowdown in the economy necessary to rein in inflation is what has convinced bank economists the RBA will need to start cutting rates,which have risen over the past 15 months at their fastest pace since the late 1980s.
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CBA senior economist Belinda Allen said the RBA could deliver a full percentage point in cuts through 2024.
“We expect the economy to have slowed,inflation to have moved down closer to target and the labour market to be softening to prompt the start of the easing cycle,” she said.
A percentage-point reduction in the cash rate would reduce the monthly repayments on a $600,000 mortgage by more than $400.