Australia’s central bank is yet to rule out more interest rate hikes but few experts expect more increases to eventuate. 

Yet the timing of rate cuts remains a source of speculation following the Reserve Bank of Australia’s decision to keep interest rates on hold at 4.35 per cent at its February board meeting.

The no-change call was widely expected given annual inflation came in below expectations at the last print. 

But the board struck a determined tone in its post-meeting statement, noting that while inflation was easing it was still high and “a further increase in interest rates cannot be ruled out”.

At a press conference, Governor Michele Bullock similarly kept her options open and said the board would be watching the economic data to guide its next move. 

“Nothing’s in, nothing’s out,” she said on Tuesday.

The RBA sees inflation falling to 3.3 per cent by June this year before easing very gradually to 2.8 per cent – within the two to three per cent target range – by December 2025.

“We’re looking for data which convinces us and helps us to be reassured that inflation is coming back to target within that time frame.” 

Westpac chief economist Luci Ellis does not expect further increases to the cash interest rate but said cuts were “still some way off”.

“The RBA board will need to be sufficiently comfortable that inflation will definitely decline into the two-three per cent target band,” she said.

“It will also want to be confident in the recovery in productivity.”

The RBA was likely to reach this level of comfort come September, she added.

Commonwealth Bank also expects an easing cycle to begin in September, with National Australia Bank and ANZ both pencilling in a November start.

HSBC’s Paul Bloxham is tipping a longer wait on hold before cuts start in early 2025, whereas AMP Australia’s Shane Oliver expects the easing cycle to begin midway through this year.

But Dr Oliver warned the road to rate cuts would probably be bumpy.

“The main risk is that rate cuts get delayed till later this year reflecting sticky services inflation, supply side risks and the RBA waiting to see how the changed stage three tax cuts are impacting demand,” he wrote in a note. 

This post was originally published on Michael West.