Here's when ANZ says the first interest rate cut will be

A person leans over to whisper a secret to a colleague during a meeting.

The economics team at ANZ Group Holdings Ltd (ASX: ANZ) has maintained its view that the Reserve Bank will likely implement the first interest rate cut in November.

ANZ reaffirmed the timing of its rate cut prediction after the Australian Bureau of Statistics (ABS) released the March jobs data this morning.

The data revealed an 0.1% seasonally adjusted rise in the unemployment rate to 3.8%. The ASX 200 wobbled on the news before recommencing its upward trend for the day.

ANZ tips first interest rate cut in November

As reported in the Australian Financial Review (AFR), the ANZ economics team says the modest lift in unemployment has not altered its view on the anticipated timing of the first interest rate cut.

They expect that first cut to be 25 basis points in size.

The bank said:

The RBA was forecasting employment growth to slow to 2.0 per cent year-on-year and the unemployment rate to reach 4.2 per cent by the end of the June quarter this year.

For that to be realised, employment needs to fall slightly in the June quarter and the unemployment rate to increase faster than it has over recent months.

What does CBA think?

CBA Head of Australian Economics Gareth Aird said his team continued to expect the first rate cut in September.

The CBA team is holding firm on its timing predictions despite unemployment coming in lower than expected. Analysts had expected unemployment to lift from 3.7% in February to 3.9% in March.

Aird is among many economists to comment on the strength of the jobs market despite a weak economy.

This is a trend all over the world, with many economists dubbing it “immaculate disinflation”.

This is where inflation steadily returns to a central bank’s target without major job losses.

Aird reckons unemployment in Australia will continue to rise but perhaps not as quickly as his team has been forecasting.

Their base case is for unemployment to reach 4.5% by the fourth quarter of 2024.

Aird suspects labour market flexibility may be preventing a larger rise in unemployment.

The labour market has never been more flexible. And the ability for workers to dip in and out of employment is high.

The upshot is that labour market slack can rise even if it’s not reflected in a more meaningful lift in the unemployment rate.

The ASX 200 has struggled this week after US Federal Reserve chair Jerome Powell commented that stronger-than-expected inflation data released last week had not given policymakers there enough confidence to cut interest rates soon.

This may mean higher interest rates in the world’s largest economy for longer.

It has prompted speculation that any delay in interest rate cuts in the US may affect the timing of cuts in other Western countries, like Australia.

However, ANZ and CBA appear to disagree.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the ‘five best ASX stocks’ for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now…

See The 5 Stocks *Returns as of 1 February 2024

More reading

Motley Fool contributor Bronwyn Allen has positions in Anz Group and Commonwealth Bank Of Australia. 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.