Following the release of an upbeat GDP report this week, ANZ has cautioned that the Reserve Bank of Australia (RBA) may have concluded its cycle of interest rate reductions. Prior to the data’s release, financial markets had fully priced in a rate cut in November, bringing the rate down to 3.35 per cent, with expectations of another cut next year.
Adam Boyton, head of Australian economics at ANZ, stated that while they still believe a rate cut in November is more likely than not, the positive GDP figure increases the possibility that there will be no rate cut in November or at all from this point forward. He noted that if consumer spending momentum continues and no weakness emerges in the CPI or labour market data, the RBA might view the cash rate as broadly neutral, negating the need for further cuts. ANZ is one of Australia’s largest banks and provides a range of financial services to individuals and businesses.
Financial markets are currently implying a 79 per cent chance that the RBA will lower the cash rate for the fourth time this year in November. Furthermore, markets indicate a strong likelihood of another rate cut occurring next year. This contrasts with ANZ’s revised assessment, which suggests the RBA may hold steady if the economic data remains positive.
The RBA’s next moves will be closely watched by investors and economists alike, as they navigate the conflicting signals of strong GDP growth and persistent expectations of further monetary easing.
