BlackRock casts doubt on 2024 rate cut
Ahead of the Reserve Bank of Australia’s (RBA) upcoming meeting, BlackRock Australasia has reaffirmed the market’s view that rate cuts are likely out of the picture for 2024.
Early last month, Australia’s central bank left the cash rate unchanged at 4.35 per cent for the sixth consecutive time.
The RBA has three monetary policy decisions left to announce for 2024: one next week on 24 September, followed by 5 November and 19 December.
Sharing its weekly market commentary in the lead-up to the central bank’s next board meeting, BlackRock Australasia has cast doubts on the possibility of monetary easing occurring this year.
“The RBA’s approach will likely contrast with other central banks like the Fed. They remain concerned about core inflation, and governor Michele Bullock has been strident about raising rates again should inflation remain persistently elevated,” commented Craig Vardy, head of fixed income at BlackRock Australasia.
“We therefore don’t think the RBA will cut rates this year. That leaves us looking into the first quarter of 2025 for when they could look to cut provided the data goes their way.”
However, Vardy projected a “very shallow” easing cycle once the RBA goes down that path, potentially meaning 25-basis-point cuts in 2025.
BlackRock Australasia’s sentiment echoes that of Schroders, which recently stated that it does not expect the central bank to begin easing monetary policy this year unless a collapse in economic growth were to occur. Instead, it is more likely to see the RBA start cutting rates in 2025, opposing views over at AMP that it may cut rates before Christmas.
Meanwhile, Katie Petering, head of multi-asset investment strategy at BlackRock Australasia, observed the divergence occurring among central banks across the globe.
“Policy-wise, it’s been a jam-packed two months, with quite a bit of divergence among central banks. We’ve had the Bank of Japan hiking, the ECB cutting, and the anticipated Fed cut happening this week,” she explained.
“This has meant that the correlation between global equity markets is at its lowest, making it crucial to be selective and deliberate about portfolio exposures.”
With this backdrop in mind, the BlackRock Australian multi-asset team is focused on US equities, portfolio diversifiers such as gold, alongside liquid alternative exposures including hedge funds.
AUTHOR
Jasmine Siljic
Recommended for you
Pendal has told investors it will start winding up its Enhanced Credit fund from December, its third fund closure this year.
Fund managers made a “big shift” into bond-sensitive sectors like utilities in September and away from cyclicals, while risk appetite is at an 11-month low.
Two investment professionals have underscored to advisers why integrating a broad range of fixed income exposures in client portfolios is critical for optimal returns.
Platinum is “considering the merits” of being the specialist alternative manager’s latest M&A target.
