RBA tipped to cut rates in late-2023, early 2024

Commonwealth Bank is tipping a cut in the cash rate by the RBA from a peak of 2.6 per cent starting in late 2023, and Westpac and ANZ expect a terminal rate above 3 per cent with cuts by mid-2024.

Households appear to be responding to rising interest rates. After several years of strong monthly deposits, the amount of money being saved has slowed dramatically since the first-rate rise in May.Household deposits increased by just $5 billion in May and June compared with $25 billion in the two preceding months. Whether this is a seasonal adjustment or more structural will become clearer in July and August when tax returns lob into people’s bank accounts.

“However, domestic issues, particularly labour shortages, are becoming more severe with wage cost and labour supply the two most pressing concerns for businesses.

Don’t go up to quick, so you don’t have to reduce too quick. RBA should take it to 1.75% or 2% if needed in August and just wait till Q4 2022 to see how it flows though, as a full quarter is needed to observe the effect.

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