Bendigo Bank's Chief Economist, David Robertson, has predicted Australian homeowners are unlikely to see rate cuts until at least September, and more likely not until 2025.

This forecast hinges on the Reserve Bank of Australia's (RBA) rate cuts, which are dependent on core inflation returning to or falling below 3%.

The latest Monthly Indicator showed the Consumer Price Index (CPI) down to 3.4%, however, the core measure was still up at 3.8% in January.

“Ultimately RBA rate cuts will depend on core inflation returning to or below 3%, and while the latest Monthly Indicator showed CPI down to 3.4%, the core measure was still up at 3.8% in January, which is exactly where we have forecast it will land in the next quarterly numbers out in late April,” Robertson said.

The RBA's preferred measure of core inflation, the Trimmed Mean, was 4.2% at the end of 2023. Robertson believes that while this figure should continue to ease, it won't be enough for cuts until September at the earliest. “The RBA’s preferred measure of core inflation, the Trimmed Mean, was 4.2% at the end of 2023 and should continue to ease, but while a fall to 3.8% may see the RBA remove its tightening bias in the May meeting, it won’t be enough for cuts until September at the earliest," he explained.

Meanwhile, progress on inflation in other parts of the world is promising. The US Core Personal Consumption Expenditures (PCE) is down to 2.8% year-on-year, suggesting the Federal Reserve will be cutting rates by June, and a similar scenario is expected for the European Central Bank. “Elsewhere progress on inflation is promising with the US Core PCE down to 2.8% year-on-year, suggesting the Federal Reserve will be cutting rates by June, and similarly for the European Central Bank,” Robertson noted.

“And lastly, asset prices remain at record highs for stocks and property, with markets continuing to bank on expected rate cuts and the hope of a soft landing in the US. The US yield curve remains inverted, so a soft landing is a big assumption, but for the Australian dollar, while the strong US Dollar is likely to keep the Aussie around 65 to 67 cents for some months, we expect some relative strength emerging in the second half as the Fed eases rates while the RBA sit tight, potentially seeing a move above 70 cents,” said Robertson.