Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
MNI (MELBOURNE) - The Reserve Bank of Australia will begin what is likely to be only a shallow easing cycle in Q1 2025 with two consecutive 25-basis-point rate cuts as growth slows and inflation settles back into the 2-3% target band, a prominent Australian economist has told MNI.
CPI inflation is already likely to have fallen back to target, said Guay Lim, research head, macroeconomics modelling at the Melbourne Institute (University of Melbourne) and a member of the Australian National University's (CAMA) RBA Shadow Board since 2007.
Lim’s team at the Melbourne Institute calculates a monthly CPI that has a longer history and is more developed than the Australian Bureau of Statistics’ monthly indicator. (See MNI INTERVIEW: Aussie Monthly CPI To Remain Despite Gaps - ABS) The metric slowed to 2.5% y/y over August from 2.8% the prior month. (See charts)
Interest rates are however unlikely to be cut dramatically, as the current 4.35% cash rate was likely very close to neutral, Lim said.
RBA overnight index swaps have priced in a 4.15% cash rate by the end of this year and continued easing throughout 2025.
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Overseas developments that could sharply impact import prices remain the most significant risk to the RBA’s potential 2025 easing, Lim said.
National accounts data which showed labour productivity fell by 0.8% over the June quarter, is also concerning, she added. "People are starting to look not just at productivity, but also at investment,” she continued. “It's a broader story. It's a story about innovation, about industry structure, about investment. There needs to be more focus on technology and skills development, recognising our economy is becoming more services-oriented."
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.