Economist Richard Holden believes the RBA won’t be cutting interest rates until at least 2026. (Source: UNSW/Getty)
Two experts believe Aussie homeowners won’t get any mortgage relief until at least 2026. The Reserve Bank of Australia (RBA) decided to hold interest rates at the 13-year high of 4.35 per cent following its two-day September meeting.
Not a single expert from Finder’s research was tipping a cut from this meeting and the overwhelming majority (15) believe the first round of cuts will happen in February 2025. But Richard Holden, Professor of Economics at UNSW Business School, told Yahoo Finance homeowners should expect to hold their breath longer — much longer.
“We’re not going to solve this inflation problem by cutting rates. We’re going to make it worse,” he said.
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He and Malcolm Wood, Ord Minnett’s head of institutional research, reckon the first rate cut won’t come until sometime in 2026.
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The RBA has been insistent that inflation has to come into the 2-3 per cent range before rates should be cut.
Governor Michele Bullock said a lot of work needs to be done to get inflation down and all but ruled out a rate cut this year.
Will you be forced to sell your home if the RBA doesn’t cut rates this year? Email stew.perrie@yahooinc.com
At the post-meeting press conference, Bullock said the bank isn’t convinced inflation is moving in the direction it needs for a cut.
“The board needs to be confident that inflation is moving sustainably towards the target before any decisions are made about a reduction in interest rates, so we really need to see progress on underlying inflation coming back down toward the target,” she said.
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Where is inflation at the moment?
Data from the Australian Bureau of Statistics (ABS) shows inflation has fallen dramatically since the 2022 peak of 7.8 per cent.
On Wednesday, new figures revealed it dropped to its lowest point in nearly three years to just 2.7 per cent in the 12 months to August, which is down from 3.5 per cent in July.
But a big factor in that fall are the state and federal electricity subsidies handed out after July 1.
Holden said it’s “misleading” to focus on headline inflation because it can be swayed by things like government handouts.
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He said the number to keep your eyes on is trimmed inflation, which is also called core inflation or underlying inflation.
This “smooths out the impact of temporary or irregular price changes” like from subsidies and excludes the top and bottom 15 per cent of price changes to give a more accurate reflection of what’s going on in Australia’s economy. The economist said that number is much harder to move.
“Underlying inflation is a long game,” he told Yahoo Finance.
The RBA also noted that trimmed inflation has been particularly sticky over the past few months.
“Our current forecasts do not see inflation returning sustainably to target until 2026,” it said in its September meeting notes.
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“In year-ended terms, underlying inflation has been above the midpoint of the target for 11 consecutive quarters and has fallen very little over the past year.”
Trimmed inflation came in at 3.4 per cent for August, which is still a considerable drop from the 3.8 per cent in July.
Economist and Yahoo Finance contributor Stephen Koukoulas has argued the RBA should feel comfortable cutting interest rates soon based on headline inflation.
“The RBA is refusing to cut interest rates because it is guessing that the step lower in inflation in August will be temporary, a call that is based on faith not facts,” he wrote.
“In the end, the markets embraced the low inflation result and yet again discounted the RBA view of the economy by pricing in a better than even chance of a 25 basis point interest rate cut before the end of 2024 and a total of 125 basis points of interest rate cuts by the end of 2025.”
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But what about other countries cutting their interest rates?
The US Federal Reserve announced last week it was finally reducing its interest rates from a 23-year high.
In a near-unanimous decision, the rate was slashed by 0.5 percentage points to a range of 4.75 to 5 per cent.
It was the first rate cut since 2020 and experts are predicting there will be two more rate cuts by Christmas, four more cuts in 2025 and twice again in 2026.
Inflation peaked in the US in June 2022 at 9.1 per cent and is now at 2.5 per cent.
Finder spoke to dozens of experts about when they think the RBA will cut interest rates. (Source: Finder)
The US’s move brought it in line with other major nations including the European Union, the UK, Canada, New Zealand, Denmark, Switzerland, China, and many others.
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Federal Reserve Chairman Jerome Powell said waiting longer to reduce the federal funds rate compared to other nations “really paid dividends” as it allowed policymakers to get more comfortable about the downward path of inflation.
Holden said Australia will likely have to follow a similar path.
“It’s a real shame that we didn’t do what the US and the UK and Canada and Europe and New Zealand did, which was take our medicine early on, raise rates more aggressively, deal with the problem, not be so lavish with government spending,” he explained to Yahoo Finance.
“You can see the fruits of that… look at America… that’s the story of what we should have done, and we haven’t done it, and we’re all paying the price for it.”
When do the Big Four banks think interest rates will drop?
Commonwealth Bank expects the RBA to cut rates in December 2024. It thinks there will be five 0.25 per cent cuts by the end of 2025, taking the cash rate to 3.10 per cent.
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Westpac thinks there will be a cut in February 2025, with four 0.25 per cent cuts in total to bring the cash rate down to 3.35 per cent.
NAB thinks it will be in May 2025, although it says February is possible, with five 0.25 per cent cuts down to 3.10 per cent.
ANZ has forecast a February 2025 cut, with three cuts in total to bring the cash rate down to 3.60 per cent.
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The Federal Reserve gave investors an early Christmas present by lowering interest rates by 25 basis points (i.e., 0.25%) marking its third rate cut this year. In the past, a change like this in the “long end” of the interest rate yield curve has triggered a predictable, investable pattern. Typically, this pattern would be bearish for finance stocks, particularly banks—investors would buy bank stocks when rates rose and sell them as rates fell….
Dozens of protesters from the “Religious Zionist Reservists Forum” and the “Shared Service Forum” demonstrated Saturday evening outside the home of Finance Minister Bezalel Smotrich in Kedumim.
The protesters arrived with a direct and pointed message, centered on a symbolic “draft order,” calling on Smotrich to “enlist” on behalf of the State of Israel and oppose what they termed the “sham law” being advanced by MK Boaz Bismuth and the Knesset’s haredi parties.
Among the protesters in Kedumim were the parents of Sergeant First Class (res.) Amichai Oster, who fell in battle in Gaza. Amichai grew up in Karnei Shomron and studied at the Shavei Hevron yeshiva.
Protesters held signs reading: “Smotrich, enlist for us,” along with the symbolic “draft order,” calling on him to “enlist for the sake of the State’s security and to save the people’s army – stand against the bill proposed by Bismuth and the haredim!”
Parallel demonstrations were held outside the homes of MK Ohad Tal in Efrat and MK Michal Woldiger in Givat Shmuel.
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Representatives of the “Shared Service Forum” said: “We are members of the public that contributes the most, and we came here to say: Bezalel, without enlistment there will be no victory and no security. Do not abandon our values for the sake of the coalition. The exemption law is a strategic threat, and you bear the responsibility to stop it and lead a real, fair draft plan for a country in which we are all partners. It’s in your hands.”
The global carbon market is at an inflection point as discussions during the recent COP meeting in Brazil demonstrated.
After years of negotiations over carbon market rules under Article 6 of the Paris Agreement, countries are finally moving on to the implementation phase, with more than 30 countries already developing Article 6 strategies. At the same time, the voluntary market is evolving after a period of intense scrutiny over the quality and integrity of carbon credit projects.
The era of Carbon Markets 2.0 is characterised by high integrity standards and is increasingly recognised as critical to meeting the emission reduction goals of the Paris Agreement.
And this ongoing transition presents enormous opportunities for financial institutions to apply their expertise to professionalise the trade of carbon credits and restore confidence in the market.
The engagement of banks, insurance companies, asset managers and others can ensure that carbon markets evolve with the same discipline, risk management, and transparency that define mature financial systems while benefitting from new business opportunities.
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Carbon markets 2.0
Carbon markets are an untapped opportunity to deliver climate action at speed and scale. Based on solutions available now, they allow industries to take action on emissions for which there is currently no or limited solution, complementing their decarbonization programs and closing the gap between the net zero we need to achieve and the net zero that is possible now. They also generate debt-free climate finance for emerging and developing economies to support climate-positive growth – all of which is essential for the global transition to net zero.
Despite recent slowdowns in carbon markets, the volume of credit retirements, representing delivered, verifiable climate action, was higher in the first half of 2025 than in any prior first half-year on record. Corporate climate commitments are increasing, driving significant demand for carbon credits to help bridge the gap on the path to meeting net-zero goals.
According to recent market research from the Voluntary Carbon Markets Integrity initiative (VCMI), businesses are now looking for three core qualities in the market to further rebuild their trust: stability, consistency, and transparency – supported by robust infrastructure. These elements are vital to restoring investor confidence and enabling interoperability across markets.
MSCI estimates that the global carbon credit market could grow from $1.4 billion in 2024 to up to $35 billion by 2030 and between $40 billion and $250 billion by 2050. Achieving such growth will rely on institutions equipped with capital, analytical rigour, risk frameworks, and market infrastructure.
Carbon Markets 2.0 will both benefit from and rely on the participation of financial institutions. Now is the time for them to engage, support the growth and professionalism of this nascent market, and, in doing so, benefit from new business opportunities.
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The opportunity
Institutional capital has a unique role to play in shaping the carbon market as it grows. Financial institutions can go beyond investing or lending to high-quality projects by helping build the infrastructure that will enable growth at scale. This includes insurance, aggregation platforms, verification services, market-making capacity, and long-term investment vehicles.
By applying their expertise and understanding of the data and infrastructure required for a functioning, transparent market, financial institutions can help accelerate the integration of carbon credits into the global financial architecture.
As global efforts to decarbonise intensify, high-integrity carbon markets offer financial institutions a pathway to deliver tangible climate impact, support broader social and nature-positive goals, and unlock new sources of revenue, such as:
Leveraging core competencies for market growth, including advisory, lending, project finance, asset management, trading, market access, and risk management solutions.
Unlocking new commercial pathways and portfolio diversification beyond existing business models, supporting long-term growth, and facilitating entry into emerging decarbonisation-driven markets.
Securing first-mover advantage, helping to shape norms, gain market share, and capture opportunities across advisory, structuring, and product innovation.
Deepening client engagement by helping clients navigate carbon markets to add strategic value and strengthen long-term relationships.
Harnessing the opportunity
To make the most of these opportunities, financial institutions should consider engagements in high-integrity carbon markets to signal confidence and foster market stability. Visible participation, such as integrating high-quality carbon credits into institutional climate strategies, can help normalise the voluntary use of carbon credits alongside decarbonisation efforts and demonstrate leadership in climate-aligned financial practices.
Financial institutions can also deliver solutions that reduce market risk and improve project bankability. For instance, de-risking mechanisms like carbon credit insurance can mitigate performance, political, and delivery risks, addressing one of the core challenges holding back investments in carbon projects.
Additionally, diversified funding structures, including blended finance and concessional capital, can lower the cost of capital and de-risk early-stage startups. Fixed-price offtake agreements with investment-grade buyers and the use of project aggregation platforms can improve cash flow predictability and risk distribution, further enhancing bankability.
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By structuring investments into carbon project developers, funds, or the broader market ecosystem, financial institutions can unlock much-needed finance and create an investable pathway for nature and carbon solutions.
For instance, earlier this year JPMorgan Chase struck a long-term offtake agreement for carbon credits tied to CO₂ capture, blending its roles as investor and market facilitator. Standard Chartered is also set to sell jurisdictional forest credits on behalf of the Brazilian state of Acre, while embedding transparency, local consultation, and benefit-sharing into the deal. These examples offer promising precedents in demonstrating that institutions can act not only as financiers but as integrators of high-integrity carbon markets.
The institutions that lead the growth of carbon markets will not only drive climate and nature outcomes but also unlock strategic commercial advantages in an emerging and rapidly evolving asset class.
However, the window to secure first-mover advantage is narrow: carbon markets are now shifting from speculation to implementation. Now is the moment for financial institutions to move from the sidelines and into leadership, helping shape the future of high-integrity carbon markets while capturing the opportunities they offer.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
