Update: Westpac chief economist Luci Ellis has unveiled the bank now predicts the first cash rate cut to come in February 2025.
"We have revised our view to an expectation that the RBA will first start cutting rates at the February 2025 meeting, and end [the cutting phase] at 3.35%," she said.
"There are risks on both sides of this forecast."
The big four bank previously predicted the RBA board would slash the cash rate from its 12-year high of 4.35% at its November meeting, a move that was expected to be the first in a series of rate cuts.
However, new RBA forecasts released on Tuesday afternoon and later comments from RBA governor Michele Bullock appear to have dented Westpac's confidence.
And that's not the only news of Westpac on Wednesday, with the major bank revealing it will axe its RAMS brand in an effort to simplify its portfolio.
Westpac to axe embattled RAMS brand
RAMS is no longer taking applications for new home loans, Westpac revealed to shareholders on Wednesday.
Existing RAMS customers don't need to take any action and new deposit accounts can still be opened.
Those who already hold home loans with the bank will see no change to their mortgages and will still be able to use the myRAMS app, website, and the RAMS call centre.
Though, local RAMS Home Loan Centres will soon be closed.
Westpac will retain ownership over the RAMS home loan portfolio and will reach out to anyone who has recently applied for a home loan through the lender to provide assistance.
It comes after the big four bank began a strategic review into the struggling brand last year.
"We have delivered considerable portfolio simplification over recent years, and after a thorough review, have decided that offering home loans through RAMS franchisees is not right for Westpac," Westpac managing director of mortgages Damien MacRae said.
"We will help our customers, franchisees and our people through this process.
"We are also providing franchisees with mutually agreed support and there will be ongoing opportunities for RAMS employees within Westpac."
According to reports, Westpac abandoned attempts to sell the brand earlier this year.
ASIC has also been investigating RAMS in relation to home loans issued between January 2019 and September 2023, while the bank has responded to queries from APRA regarding the brand.
Topping it off, a class action against RAMS was brought by former franchise owners, claiming their franchise agreements were terminated without proper cause, in May.
Westpac looks to push back cash rate cut prediction
Meanwhile, documents and commentary accompanying the RBA board's latest cash rate decision has left Westpac reconsidering its previously-provided interest rate predictions.
"The RBA left rates on hold in August as we expected, but their rhetoric and view of aggregate demand were surprisingly hawkish," Ms Ellis said.
"Given the board apparently does not see its way to cutting rates this year, our expectation of a November rate cut is unlikely to be achieved."
Ms Bullock fronted press in the wake of the RBA board's decision to hold the cash rate in August saying, "a near-term reduction in the cash rate doesn't align with the board's current thinking".
Ms Ellis noted that this comment, as well as other forecasts, suggests the RBA is determined to get inflation much closer to target before cutting interest rates.
That goes against widely-held presumptions that cuts would come sooner, thereby reducing the risk of inflation dropping too low in the coming months and years.
"We have now revised our view to an expectation that the RBA will first start cutting rates at the February 2025 meeting," Ms Ellis said on Wednesday evening.
"Consistent with our earlier forecast, the trajectory of rate cuts is expected to be tentative and conservative, at one 25 basis point cut per quarter.
"We have also revised the end-point of the cutting phase to 3.35%, from 3.10% previously.
"For some time, our view has been that the global structure of interest rates will be higher than it was between the Global Financial Crisis and the pandemic.
"We have now also incorporated the fact that the RBA seems to be putting more weight on its own models of neutral than they did previously.
"The average of these models is a bit above 3.10%."
The RBA aims to keep inflation in the range of 2% to 3% on an annual basis - a target that has only been achieved in five quarters over the last decade.
CBA, NAB, and ANZ cash rate calls
Westpac's about-face comes in the footsteps of similar pivots from both ANZ and NAB.
ANZ pushed back its expectations for the first rate cut from November to February 2025 two months ago, while NAB more recently reconsidered its own forecasts, predicting the first cut to come in May 2025.
CommBank is now the only bank still focused on a November cash rate cut.
Though CommBank head of Australian economics Gareth Aird notes "the wriggle room on the data configuration that would see the cash rate cut in November is still tight".
The expectation of the biggest of the big four banks relies on the Consumer Price Index (CPI) read for the September quarter showing inflation to have lifted 0.8% or less quarter-on-quarter.
Inflation rose 1% quarter-on-quarter over the three months to June, the latest figures show, coming in at 3.8% on an annual basis.
Image by Kiwiteen123 on Wikimedia Commons
This article was first published on Wednesday 7 August and was updated on Thursday 8 August.
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