Australians hoping for an interest rate cut this year may be disappointed, according to Bendigo Bank's May Economic Update. The bank suggests that persistent inflation and strong jobs data could keep the current 4.35% interest rate steady until 2025.

The prediction challenges market expectations, with some sectors already pricing in another hike.

Bendigo Bank's long-standing view is that the Reserve Bank of Australia (RBA) will begin rate cuts in 2025 to bolster a slowing economy. However, the bank does not foresee cuts in 2024 due to the challenges of eradicating inflation. “Our view for over a year has been that RBA rate cuts will start in 2025 to help support the slowing economy, but not in 2024 because of how difficult it is to eradicate inflation,” said Bendigo Bank head of economic and market research, David Robertson.

Robertson outlined that strong jobs data and stubborn core inflation have led some market economists to predict fresh RBA hikes, but that weaker retail sales numbers indicated that households are struggling and cutting back on discretionary spending.

“The timing of the first cut is at the mercy of the data, and economic data in this period is generally all over the shop, but we’re still expecting very slow economic growth and domestic demand ahead, with the main bright spots coming from international tourists and students, and strong public investment," said Robertson.

“And lastly, the Federal Budget this week is likely to reveal a modest surplus helped by firm commodities and strong labour markets, offset to a degree by the stage three tax cuts and other cost of living support - but all with a fairly modest impact on inflation,” said Robertson.