Thoughts on Interest Rates
Hi Team, Quick question do you think the failure of the Fed not to cut rates earlier this week will weigh on the RBA Board? I note you have forecasted a 0.25% cut in February by the RBA. Thanks Jeremy
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Answer
Hi Jeremy,
In a nutshell no, the RBA and Fed are at a different stage of the cycle:
- The RBA has maintained the official cash rate at 4.35% since November 2023. The last time the RBA reduced the cash rate was in November 2020, when it was lowered to 0.10%.
- Conversely, the Fed the started cutting rates in September 2024, marking the first reduction since 2019. Over the subsequent months, the Fed implemented three consecutive rate cuts, totaling a full percentage point, bringing the target interest rate range to 4.25% to 4.50% by December 2024. They now appear to be on hold for a while.
We reiterate MM is anticipating a 0.25% rate cut in February, with more cuts to follow.
