ANZ the latest to ditch November rate cut prediction

ANZ follows NAB and Commonwealth Bank in retracting the November rate cut call, with ANZ and CommBank now tipping a February 2026 cut while NAB believes the cash rate will remain at 3.60% until May.

While CommBank changed its mind on the back of RBA Governor Michele Bullock's 'more hawkish than expected' rhetoric after the September decision, forecasts for price increases from July to September were the main impetus for ANZ's change of heart.

ANZ forecasts headline inflation of 1.2% through the September quarter, up from 0.7% in June, which would make prices on average 3.1% higher than in September 2024 - beyond the RBA's 2-3% target range.

Trimmed mean inflation (excluding things like fuel and food with particularly volatile prices) is forecast to be 0.9% for the quarter and 2.8% annually, up from 2.7% in June, with "upside risk" to that estimate.

"As a result, we no longer expect a rate cut from the RBA in November," ANZ economists Adelaide Timbrell and Adam Boyton wrote.

"We remain of the view that a final easing to 3.35% is more likely than not, although the most likely scenarios are one or no cuts instead of one versus two or more."

The February prediction was also qualified as "depending on...the upcoming data," with Ms Timbrell and Mr Boyton suggesting it's plausible the next cut may fall even later.

"The RBA Board might...wait longer to be certain that inflation is sustainably heading toward the midpoint of the target band," the pair said.

"The focus on the midpoint - 2.5% - rather than the '2-3% target range on average' also presents this Monetary Policy Board with less wiggle room than in the past."

Any chance of a November rate cut?

For now, a November rate cut remains plausible, with Westpac still officially expecting one along with 44% of the market as of 2 October.

The RBA and Michele Bullock once again reiterated monetary policy decisions will depend on the domestic data, as well as developments overseas.

By the November meeting, the September quarter inflation numbers will be out (due 29 October) as well as the unemployment numbers for September (due 16 October).

A significant decrease to inflation, or an unexpected jump in the unemployment rate (currently at 4.2%) may make a Melbourne Cup cut more likely.

Addressing media after the September decision, Ms Bullock also highlighted the importance of China and US economic data.

A substantial economic slowdown in either or both of Australia's major trade partners between now and the November meeting could improve the case for a cut.

Will the cash rate ever go back below 3%?

Three of the big four banks are now officially predicting the terminal cash rate - the rate that the RBA will hold rates at for a prolonged period of time - will be 3.35%. 

Its not clear whether the RBA would still consider this restrictive, or whether that would be within the "neutral" cash rate range that neither encourages nor restricts economic activity.

However, ANZ's economics team believes that given GDP growth, stable unemployment and stalling disinflation, the current cash rate (3.60%) is likely "very close to neutral".

This will likely be disheartening for many mortgage holders, especially considering rates were below 3% from the start of 2013 to the end of 2022, but household spending trends and no huge jump in defaults over the past couple of years may suggest most Aussie borrowers will be able to cope with that new normal.