The Commonwealth Bank is now declaring rate cuts are unlikely before Christmas unless unemployment rises faster than predicted.

Australia’s biggest home lender has hinted that unless something dramatic happened, the Reserve Bank wasn’t planning to cut rates until February next year after the RBA’s August meeting minutes were released emphasising no relief in 2024.

Gareth Aird, the Commonwealth Bank’s head of Australian economics, said borrowers would only get relief, starting in November, if inflation fell faster than expected as unemployment climbed to levels higher than officially forecast.

‘The August board minutes indicate that if the economic data evolves in line with the RBA’s latest forecasts, the cash rate will likely stay on hold for an extended period (i.e. until at least February 2025),’ he said.

The Commonwealth Bank said a rate cut before the end of 2024 was still possible, referring to the fourth quarter or Q4.

‘The board will almost certainly need to see inflation fall faster than the RBA’s latest forecasts and unemployment move up more swiftly to cut the cash rate in 2024,’ Mr Aird said.

‘Our base case sees both inflation moderating more quickly than the RBA’s central scenario and unemployment stepping up a little faster, which is why we stick with our call for the RBA to commence an easing cycle in Q4 24.’

RBA Governor Michele Bullock a fortnight ago declared financial markets were wrong to predict rate cuts in November and December, as the cash rate was left on hold at a 12-year high of 4.35 per cent.

The minutes of the Reserve Bank’s August 5 and 6 meeting, released on Tuesday, emphasised financial markets were dreaming if they still thought a rate cut would occur this year.

‘That said, members noted that the forecasts were uncertain,’ it said.

‘Importantly, they were also based on a conditioning assumption, derived from market expectations, that the cash rate would be lowered several times in the coming year, beginning later in 2024. 

‘Based on what they knew at the time of the meeting, members agreed that monetary policy would need to be tighter than this implied path in order to bring inflation sustainably back to target within a reasonable timeframe.’

Australia’s unemployment rate in July rose to a two-year high of 4.2 per cent with 23,900 people losing their jobs last month in another sign the Reserve Bank’s aggressive interest rates are slowing the economy.

The Reserve Bank released new forecasts earlier this month predicting unemployment rising to 4.3 per cent by the end of 2024.

The Commonwealth Bank said a rate cut could occur this year if the jobless rate rose to a higher level, and it continues to predict monetary policy being eased in November.

But underlying inflation would also have to show signs it would fall back within the RBA’s 2 to 3 per cent target in early 2025 instead of late 2025.

The Reserve Bank has emphasised a rate cut by the end of 2024 was unlikely but the minutes didn’t entirely rule out relief either from the most aggressive hikes since the late 1980s.

‘Based on the information available at the time of the meeting, it was unlikely that the cash rate target would be reduced in the short term, and that it was not possible to either rule in or rule out future changes in the cash rate target,’ it said.

Mr Aird was scathing of the RBA’s bob-each-way approach. 

‘We struggle to reconcile a message from the board that emphasises such a high degree of uncertainty around the economic outlook with what we would categorise as opaque forward guidance on the cash rate,’ he said.

The 30-day interbank futures market is continuing to predict rate cuts in November and December, ignoring Ms Bullock’s declarations this month of no relief this year in a media conference and before a parliamentary hearing.

The Commonwealth Bank last week also slashed term deposit account rates by 50 basis points, in a sign the banks have given up competing for the business of savers.

NAB and ANZ have also cut their term deposit rates.