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MNI BRIEF: RBA's Lowe Says Rate Cuts In 2024 Are 'Plausible'

(MNI) Perth

Reserve Bank of Australia Governor Philip Lowe said it was "plausible" that rates could be cut in 2024 but that would require signs that inflation was on track to return to target, he told a House of Representatives economics committee on Friday.

The comments came as Lowe was quizzed about market pricing showing the prospect of a rate cut in 2024 after additional rate hikes this year. Overnight indexed swaps point to a peak rate of around 4.1% later this year compared to the current cash rate of 3.35%.

"In Australia, the market pricing at the moment is rates get up a bit and then they just stay there this year and start coming down next year. That can happen if we get on top of inflation. If inflation expectations stay well anchored, the supply side problems get fixed up, wage growth and wage setting doesn't move up too fast, we can come back on that narrow path."

"That is a plausible scenario that rates rise and then start coming down next year, but a few things are going to have to go right for that to happen."

Lowe said the full impact of rate hikes was yet to be felt as 880,000 borrowers on fixed rate mortgages were yet to roll over to variable rates. "So that's going to come through this year and next year I think there's another 400,000 people with fixed rate loans maturing. That's a big effect still to come."


Robert covers RBA and RBNZ policy and the economy for MNI in Australia.
Robert covers RBA and RBNZ policy and the economy for MNI in Australia.

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