ANZ brings forward rate cut call to February

ANZ Revises Cash Rate Forecasts, Predicts February Cut

Australia and New Zealand Bank (ANZ) has revised its cash rate predictions, now expecting the Reserve Bank of Australia (RBA) to reduce the cash rate by 25 basis points (bp) at its February meeting (scheduled for 17–18 February 2025). This adjustment would bring the cash rate down to 4.10%.

Previously, ANZ had forecasted the first cash rate cut to occur in May 2025 due to stronger employment growth, robust business conditions, and increased consumer confidence. However, recent data, including lower-than-expected inflation figures for November 2024 and declining new dwelling price growth, has prompted the bank to move its projection back to February.

ANZ now anticipates two 25bp cuts during 2025, in February and August, which would reduce the cash rate to 3.85%.

Inflation Insights Drive Forecast Changes

The November 2024 inflation figures showed inflation was below ANZ’s expectations, leading to updates in its December forecasts. ANZ economists Catherine Birch and Adam Boyton expect Q4 trimmed mean inflation to be 0.5% quarter-on-quarter—the lowest since Q2 2021—resulting in an annual rate of 3.2%, below the RBA’s forecast of 3.4%.

Birch and Boyton commented, “We think this will be enough for the RBA to cut the cash rate by 25bp at its February meeting.” They noted that while a hold in February remains possible, the RBA is likely to adopt a cautious approach in reducing policy restrictiveness, rather than initiating an aggressive easing cycle.

Broader Market Reactions

ANZ’s prediction aligns with CBA’s February cut timing, while NAB and Westpac have yet to revise their forecasts, still projecting a May reduction. As of Friday morning, markets have priced in a 75% probability of a February cut.

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