Here's what Westpac says the RBA will do with interest rates next week

Is it still too soon for the central bank to cut rates?

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Animation of a man measuring a percentage sign, symbolising rising interest rates.

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Next week will be a big one for homeowners and borrowers. That's because the Reserve Bank of Australia (RBA) will be meeting for the second time in 2024 to decide on interest rates.

In case you're wondering, the central bank traditionally meets on the first Tuesday of the month. However, starting in 2024, the RBA has reduced the number of meetings from 11 to just 8.

As part of this change, it will now be meeting on the first Tuesday in February, May, August, and November, and then during the second to last week of each quarter (March, June, September, and December).

So, with a meeting coming on Tuesday and inflation recently showing signs of slowing, could interest rates be heading lower next week?

Let's see what the economics team at Westpac Banking Corp (ASX: WBC) are expecting the RBA to do at the meeting.

Will the RBA cut interest rates next week?

According to the latest weekly economic report from Westpac, its team are not expecting the RBA to make any changes to interest rates next week.

In fact, its chief economist, Luci Ellis, believes that rates are staying on hold at 4.35% until September. At that point, Ellis is forecasting a 25 basis points cut to 4.1%. She said:

Next week, the RBA Board will meet to discuss recent economic data, including the Q4 National Accounts and Wage Price Index, to decide whether it warrants a shift in policy. Our view is that the RBA will be comforted by recent developments, given the Board's aim to bring demand back into line with supply and ensure inflation continues to trend toward and then into the target range. We continue to expect the RBA to remain on hold until September at which time they should have enough confidence in the inflation outlook to slowly begin easing policy.

The good news for borrowers is that it may not take long for further easing after that first cut. Ellis is forecasting a series of cuts to take interest rates down to 3.1% by September 2025.

So, while next week might be disappointing for homeowners, it does appear that relief is on the way.

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Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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