A recent note from Westpac suggests that there’s a consistent belief the Reserve Bank of Australia (RBA) might start cutting interest rates during their board meeting on February 18. The focus, however, is shifting toward a more crucial debate: Are the markets overly confident about the likelihood of these cuts? But even more importantly, how will the reduction cycle progress? Analysts are keenly watching to see what the terminal rate will be and the pace at which these cuts will be implemented.
Westpac is holding onto its forecast of 100 basis points in cuts for 2025, although market sentiment appears slightly more conservative, predicting just over three and a half cuts.
Turning to the Reserve Bank of New Zealand, Westpac has highlighted that the primary concern is the prospect of further easing by the bank.
Notably, all four major banks in Australia are on the same page, anticipating a 25 basis point reduction from the RBA come February 18.
