Why interest rate cuts are in sight

History shows that central banks often begin cutting rates before annual inflation falls back to target as the economy slows.

John KehoeEconomics editor

Dec 15, 2023 – 10.15am

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Two economic developments this week suggest that interest rate cuts could be coming before the next federal election. If such cuts eventuate, it would be a game-changer for the political debate.

First, the federal Treasury in the government’s mid-year budget update forecast inflation to gradually ease back inside the Reserve Bank of Australia’s 2 per cent to 3 per cent target band by the June quarter 2025 – six months earlier than the RBA expects.

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John KehoeEconomics editorJohn Kehoe is economics editor at Parliament House, Canberra. He writes on economics, politics and business. John was Washington correspondent covering Donald Trump’s first election. He joined the Financial Review in 2008 from Treasury.