CommBank reconsiders: No more rate cuts in 2025

CommBank economists reconsidered two pivotal predictions in the wake of the RBA's September hold, with its new inflation expectations impacting its outlook on the cash rate. 

CommBank delays rate cut forecast to 2026

The RBA kept the cash rate at 3.60% on Tuesday, citing the decline in inflation is slowing, price growth remains persistent in some areas, and labor market conditions are stable.

In addition to taking note of the central bank's tone, CommBank also updated its expectation for the September quarterly inflation read – due out in late October.

It now expects trimmed mean inflation to rise 0.8% in the September quarter, compared with its earlier 0.7% forecast.

That would keep underlying inflation stuck at around 2.7% annually – above the midpoint of the RBA's 2% to 3% target band.

According to CommBank, stronger September quarter inflation will likely see the RBA's attention drawn to the December quarter measure, which won't be released until early 2026.

"This upgrade to our near‑term forecast, together with the shift in tone from the RBA today, means we push out the next rate cut to February 2026," CommBank head of Australian economics Belinda Allen said.

"We expect the RBA will want to wait and see evidence that inflation continues to head towards the mid‑point of the target band before easing further."

What a delayed cut could mean for borrowers

That could be disappointing news for struggling mortgage holders, with a 25 basis point cut in November likely to have eased hip pocket strain felt by many.

The typical variable home loan rate likely sits around 5.55% p.a. right now, as per RBA data and factoring in the August rate cut, and may fall to around 5.30% p.a. if the RBA cuts in November.

That could shave nearly $80 a from the monthly repayments on a $500,000, 30-year home loan – potentially saving a borrower more than $900 a year.

How much could a rate cut save you? Mortgage Repayment Calculator

Outlook on future rate cuts mixed

The RBA board opened its statement on its September decision by acknowledging inflation's decline has slowed.

It also warned consumer prices may overshoot its own forecasts for the third quarter, contained within the Statement on Monetary Policy (SOMP), given a recent upside surprise in the less-comprehensive monthly inflation data.

"Recent data, while partial and volatile, suggest that inflation in the September quarter may be higher than expected at the time of the August SOMP," it noted.

Additionally, struggling borrowers may wish to heed CommBank's warning that even one more future rate cut is far from locked in.

"One last rate cut is not guaranteed though and the risks are building for a longer period with rates on hold," Ms Allen said.

The bank's aboutface comes on the back of a similar pivot from NAB, which recently scrapped its forecast of a November and February 2026 rate cut.

NAB is instead tipping the next cut to come in May 2026.

Bond markets have also scaled back expectations for a November cut, with a full 25 basis point move not fully priced until 2026.

ANZ is more optimistic about a November cut, but head of Australian economics Adam Boyton notes, "our confidence that [3.35%] represents the [cash rate's] end point for this cycle remains higher than our conviction on the exact timing."

Westpac, on the other hand, is still forecasting multiple cuts.

Westpac chief economist and former RBA assistant governor Luci Ellis believes, "the rate-cutting phase is not over".

"Maximum optionality has been retained but in our view, the choice is still when to cut further, not whether," she said on Tuesday.

"Our current base case of a cash rate cut in November is far from assured, though neither is it off the table."

Beyond November, Westpac still appears to be working to the assumption of additional rate cuts in February and May 2026.

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