The May call follows the example of Westpac and NAB, leaving CommBank the outlier in predicting a rate cut in February.
The strong labour market, business conditions holding around long term average levels, and a lift in consumer confidence are the macroeconomic factors influencing this change of heart.
ANZ head of Australian economics Adam Boyton also pointed to the RBA's 'hawkish' rhetoric.
"We had expected a more neutral tone by now," he explained.
If the cash rate remains on hold until May, it would see the cash rate having been held at 4.35% for eighteen months.
Any hope for mortgage holders?
Australians struggling with their home loan repayments are probably accustomed to timelines for cuts being pushed.
For a long time, rates were expected to come down in November despite RBA messaging – evidenced by a sudden drop in medium term bond yields in mid-2024, suggesting traders were anticipating near-term cuts.
However, Michele Bullock maintains underlying inflation is still too high, and monetary policy will need to be "sufficiently restrictive" until the board is confident inflation is moving sustainably back to the target range.
In the most recent Statement on Monetary Policy (SOMP), forecasts were underpinned by the assumption the cash rate will have declined to 4.10% by June, which lines up with a 25 basis point cut in May.
For mortgage holders looking for a morsel of hope, there could still be a repayment reduction sooner, with Mr Boyton saying ANZ isn't ruling out a February rate cut.
"A lower than expected Q4 CPI and some softening in the labour market could prompt the RBA to cut in February, especially given that the November board minutes appeared to open the door to an early 2025 easing," he said.
The SOMP projected unemployment to increase to 4.3% by December, with trimmed mean inflation to decline to 3.4%.
As of October, the unemployment rate was steady at 4.1% while trimmed mean inflation was at 3.5% (albeit the monthly read is typically given less credence than the quarterly print).
How many rate cuts in 2025?
While ANZ, Westpac, and NAB are in unison, their forecasts for how many cuts will follow diverge.
Westpac chief economist Luci Ellis expects rate cuts to happen hard and fast once they begin.
"We expect the initial moves to be somewhat front loaded with consecutive cuts in late May and early July," she said.
ANZ, on the other hand, is only predicting two 25 bps cuts throughout the whole year, meaning a 3.85% cash rate at the end of 2025.
The official Westpac prediction is for rates to have declined to 3.35% by the end of next year, in line with CommBank.
NAB are expecting one cut per quarter after the cycle begins in May, and for rates to be at 3.10% by mid-2026.
Image courtesy of ANZ
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