Mortgage holders may have to wait longer for an interest rate reprieve, following stronger than expected jobs figures.
The Commonwealth Bank has shifted its forecast for when the Reserve Bank will lower the official cash rate, now saying a 0.25 percentage point reduction will happen in December, as opposed to previous predictions of a November rate cut.
The revised forecast followed the unemployment rate staying at 4.2 per cent for August, with the number of jobs added to the market almost double what economists had predicted.
“The recent strength in employment growth coupled with still relatively hawkish rhetoric from the RBA governor means we now see December as the more likely month for the start of normalising the cash rate,” Commonwealth’s head of Australian economics Gareth Aird said.
“We expect the RBA will commence an easing cycle before it declares we have hit full employment given policy is currently restrictive.
“Not all the ducks have lined up for a November rate cut.”
The Reserve Bank will meet on Tuesday to determine whether to cut the official cash rate of 4.35 per cent or leave it on hold.
At its last meeting in August, it said it will be “some time yet” before inflation would return to the central bank’s target band of between two and three per cent.
It comes as the US central bank cut its own interest rates by 50 basis points, leading to speculation Australia could follow suit.
Mr Aird said the US Federal Reserve’s decision would play a factor in the Reserve Bank’s upcoming meeting.
“The RBA will generally run its own race when it comes to monetary policy in Australia,” he said.
“But, the trajectory of the US unemployment rate has been very similar to the unemployment rate in Australia.
“Given the recent data flow, it’s too early for a policy ‘pivot’ from the RBA but we continue to expect it to happen in 2024.”
