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Grogonomics Talk of interest rate cuts soon is optimistic – here’s why the RBA may decide doing nothing is safer
This week the IMF told Australians what we already knew – we are hurting from rate rises harder than anyone. But unfortunately, that is unlikely to mean the Reserve Bank is about to cut rates.
The current market expectation is that by this time next year the RBA will have cut rates twice to 3.85%. If that is comforting, just remember that a year ago the market predicted the cash rate would now be 3.35%, not 4.35%. It was only out by a full 100 basis points.
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Investors are not great at predicting where the cash rate will be in a year’s time.
Through 2017 to 2019, investors were sure the RBA was about to raise rates. It didn’t. When the RBA began raising rates in 2022, investors underestimated how quickly and by how much the bank would increase them. Through 2022 and the start of 2023 investors (and I must admit myself) assumed we must have reached the peak and yet the RBA kept going that bit higher.
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The good news for those struggling with a mortgage is that since the middle of last year investors have mostly got it right and so the chance of a rate cut before another rate rise does seem more likely than not.
But if you are struggling, do not feel that you are alone, because the IMF this week estimated that Australians feel the pinch of rising........
© The Guardian
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