Investopoly

Ep 321: Interest Rates in 2025: Cut or Comeback?

September 10, 2024 Stuart Wemyss

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In this episode, Stuart explores the ongoing debate about the future of interest rates and inflation, addressing key questions about when the Reserve Bank of Australia (RBA) might begin cutting rates. He highlights the disparity between the RBA’s forecasts, which predict inflation will only stabilise by 2026, and market expectations, which signal rate cuts as early as 2025. Drawing on historical trends and market insights, Stuart discusses the potential risks of prolonged inflation and how government spending and a tight labour market are contributing to this issue.

He also explains why Australia’s current strategy differs from other countries, noting that our reliance on variable-rate mortgages makes consumers more sensitive to rate changes. With historical data showing inflation often reaccelerates Stuart cautions that any potential rate cuts in 2025 could be short-lived, leading to further hikes.

Stuart offers a balanced view on whether the RBA can achieve the elusive "soft landing" or if more economic pain lies ahead. This episode is essential listening for anyone interested in understanding the complex factors shaping Australia's economic future.

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