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The latest inflation data from the Australian Bureau of Statistics (ABS) has sparked speculation about a possible cash rate cut by the Reserve Bank of Australia as early as February, according to Canstar.com.au.
The trimmed mean inflation rate dropped from 3.5% in October to 3.2% in November, suggesting progress towards the central bank’s target band of 2% to 3%.
While the RBA typically prioritises quarterly Consumer Price Index (CPI) figures, with the next release scheduled for January 29, the November data adds weight to discussions around monetary easing. Analysts are also closely watching upcoming labour force figures on Jan. 16 for further indications of the RBA’s potential course of action.
A recent Consumer Pulse Report from Canstar highlights that 56% of Australians are confident the government and RBA will provide cost of living relief this year. Optimism is highest in Western Australia, where 61% of respondents expressed confidence, compared to just 49% in South Australia.
Among the major banks, the Commonwealth Bank of Australia (CBA) is the only one forecasting a February rate cut, with three more expected throughout 2025. If these cuts materialise, borrowers with a $600,000 mortgage could see monthly repayments reduced by $358 by year’s end. Other banks, including Westpac, NAB, and ANZ, predict rate cuts starting in May, but ANZ noted the latest inflation data “raises the probability of a February rate cut” without revising its forecast.
Sally Tindall, data insights director at Canstar, said that while a February rate cut is possible, it remains uncertain. Instead, borrowers looking for more immediate relief should consider negotiating with their lenders or refinancing for better rates.
"There’s plenty of data still to come in between now and mid-February that could easily throw this off course,” Tindall said, pointing to Australia’s current unemployment rate of 3.9% as a factor providing the RBA with flexibility to delay action if necessary.
“However, the board knows just how much pressure higher rates have put on borrowers and renters across the country. If it’s looking for an opportunity to loosen the screws, then the next round of quarterly inflation data could be enough of a push… On a $600,000 mortgage with 25 years remaining, a cut in February has the potential to put almost $100 a month back in the pocket of borrowers struggling to stay afloat.”
