Is a February Rate Cut Imminent? Industry Experts Weigh In

The Australian Bureau of Statistics (ABS) has released its latest inflation figures, and with the numbers now within the Reserve Bank of Australia’s (RBA) target range of 2–3 per cent, speculation is mounting that a rate cut could be announced at the central bank’s meeting on February 17–18.

What the Banks Are Saying…

ANZ

Senior economist Catherine Birch noted:

"Trimmed mean inflation printed at 0.5 per cent q/q in Q4 2024, aligning with our expectations. The annual rate dropped 0.3 percentage points to 3.2 per cent y/y, below the RBA’s forecast of 3.4 per cent. We believe this will be sufficient for the RBA to lower the cash rate by 25 basis points in February.

“The RBA will likely look past headline inflation due to temporary factors and cost-of-living relief measures, but these adjustments will help bring down future inflation in expenditure classes where prices are administered or indexed."

NAB

Chief economist Alan Oster stated:

"We now anticipate a 25bps rate cut in February. The cutting phase should be gradual, with the cash rate reaching 3.1 per cent by February 2026.

"While the board is likely gaining confidence that inflation will sustainably return to target by late 2025, the labour market remains resilient. There is some risk of retightening, and growth is still expected to pick up this year."

Westpac

Chief economist Luci Ellis shared:

"Normally, one data point shouldn’t be decisive. However, this time, the CPI has been the key factor, given the mixed signals from other economic data. We now have enough evidence to conclude that disinflation is occurring faster than the RBA expected, giving the Board confidence to begin the rate-cutting cycle in February.

"When we revised our forecast in November to a May 2025 start, we didn’t rule out a February move—just that it was less probable. The better-than-expected inflation data now tilts the balance in February’s favour.

"Looking ahead, the RBA will remain data-dependent and is unlikely to rush further cuts. We anticipate reductions in May, August, and November, bringing the terminal rate to 3.35 per cent, aligning with our earlier forecast."

CBA

Chief economist Stephen Halmarick remarked:

"The weakness in December’s spending, combined with the improving inflation environment, supports our view that the RBA can begin lowering interest rates at its first meeting in February. We expect 100bps of easing throughout 2025."

Bendigo and Adelaide Bank

Chief economist David Robertson commented:

"The slightly lower-than-expected Q4 inflation data clears the way for a February rate cut and validates our projection of three cuts in 2025.

"More notably, December’s monthly inflation indicator saw the Trimmed Mean fall to 2.7 per cent, suggesting this moderating trend will continue into Q1 2025. As a result, a February 18 rate cut is now the most likely outcome, though we anticipate a shallow easing cycle given a ‘neutral’ cash rate is 3.5 per cent.

"If the RBA does cut in February, the next likely reduction would be in May, assuming Q1 CPI (released April 30) remains benign. Other influential factors include employment data and global economic developments."

Judo Bank

Taking a different stance, Judo Bank emphasized caution:

"If monetary policy were solely based on current inflation levels, there would be a case for a rate cut, particularly if the existing policy is deemed restrictive. However, monetary policy is forward-looking, and today’s inflation report provides only part of the necessary picture.

"The key question is: what would a rate cut achieve for the Australian economy? Lower rates would boost employment and inflation, but is that what’s needed given strong job numbers and inflation still slightly above the RBA’s target? This will be a judgment call for the RBA Governor and Board. Given the political backdrop, whatever decision is made in the next two meetings will likely face scrutiny.

"While the pressure on the RBA to deliver cuts is undeniable, we maintain our view that the first rate cut is unlikely before later this year."

Final Thoughts…

While the prevailing sentiment suggests a February rate cut, uncertainty remains. The RBA's decision will hinge on a combination of economic indicators, market expectations, and policy considerations. Until the meeting, speculation will continue, but the future of interest rates remains uncertain.

Rick Maggi CFP, Financial Advisor/Planner (Perth), Westmount Financial