S&P/ASX 200 Index (ASX: XJO) investors have been waiting a long time for the Reserve Bank of Australia (RBA) to begin cutting interest rates.
As you likely recall, the RBA first began hiking rates in the current tightening cycle in May 2022. Back then, the official Aussie cash rate stood at an all-time low of 0.10%.
Why was it so low?
Well, because the central bank had joined in with its global peers in an effort to stoke 'stubbornly missing' inflation.
As inflation not only re-emerged but shot to almost 8% in the final months of 2023, ASX 200 investors have watched the RBA boost interest rates 13 times in the current cycle.
The last 0.25% hike was delivered in November 2023, bringing the cash rate to today's 4.35%.
At the RBA's last meeting on 12 December 2024, mortgage holders and investors alike learned that the board had again opted to keep rates on hold.
And the board cited risks that Australians may be faced with higher interest rates for longer.
"The most recent forecasts published in the November Statement on Monetary Policy do not see inflation returning sustainably to the midpoint of the target until 2026," the board stated.
According to RBA's media release in December:
While headline inflation has declined substantially and will remain lower for a time, underlying inflation is more indicative of inflation momentum, and it remains too high… It will be some time yet before inflation is sustainably in the target range and approaching the midpoint.
Despite these cautions, money markets are pricing in more than even odds that the RBA will opt to cut rates at its 18 February meeting. And those markets are fully priced in for a rate cut at the 1 April meeting.
While a little optimism in the new year is a good thing, the markets may find those bets a bit premature.
Here's when these financial veterans are expecting the first easing in 2025.
When might ASX 200 investors expect RBA interest rate cuts?
As reported in The Australian Financial Review, the majority of interviewed chief investment officers at Australia's superannuation funds don't expect the RBA to deliver the first interest rate cut until the board meets again on 20 May, or perhaps not even until the 8 July meeting.
Potential bugbears ASX 200 investors may wish to keep an eye on are the possible global economic impacts of incoming United States president Donald Trump, along with domestic productivity growth.
Aware Super's Damian Graham expects the first RBA rate cut will be delivered in May, but warned the "final leg should not be taken for granted".
Graham said:
Key risks to our outlook include president-elect Trump's policy agenda, domestic fiscal policy in the shadow of an upcoming federal election, and whether productivity growth improves.
Colonial First State's Jonathan Armitage also has pencilled in a mid-2025 for when ASX 200 investors can expect the first RBA rate cut, with inflation only slowly returning to the central bank's target range.
"Wage growth has peaked and is projected to stabilise in 2025, which will limit disinflation in services, especially as productivity remains weak," Armitage noted.
MLC Asset Management's Dan Farmer said he expected the RBA to cut rates twice this year, also commencing mid-year. "We expect the RBA to cut rates twice in 2025, starting in the first half of the year, as domestic inflationary pressures ease in line with global trends," he said.
Cbus' Brett Chatfield said that the markets had likely priced in too many RBA interest rate cuts this year, though he does expect a cut in the first half of 2025.
"Given a more supportive growth outlook, we think the risk is that too many cuts are priced, so our preference is to tilt the portfolio to listed equities, funded from fixed interest," Chatfield said.
