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29 May 2015
RBA expected to cut rates in the medium term – Westpac
FXStreet (Edinburgh) - According to Bill Evans, Chief Economist at Westpac, the RBA could cut rates by 50 bp.
Key Quotes
“Current market pricing for RBA policy gives around a 60% probability of one rate cut by the December quarter”.
“Under our preferred scenario (rising unemployment rate in 2015; 3% GDP growth in 2016; AUD back to USD0.73 by end 2015) policy is likely to remain on hold”.
“However, we support the view implied in the RBA’s bias that the risks to rates remain to the downside”.
“In particular, any slippage in household expenditure growth which would dampen prospects for a recovery in non-mining investment would affect growth forecasts for 2016 and substantially increase the risk of lower rates”.
“However, we expect that the timing would be later than current market thinking (first move in November at the earliest) and the extent of the cuts would be a total of 50bps rather than the market’s current 25bp expectation”.
Key Quotes
“Current market pricing for RBA policy gives around a 60% probability of one rate cut by the December quarter”.
“Under our preferred scenario (rising unemployment rate in 2015; 3% GDP growth in 2016; AUD back to USD0.73 by end 2015) policy is likely to remain on hold”.
“However, we support the view implied in the RBA’s bias that the risks to rates remain to the downside”.
“In particular, any slippage in household expenditure growth which would dampen prospects for a recovery in non-mining investment would affect growth forecasts for 2016 and substantially increase the risk of lower rates”.
“However, we expect that the timing would be later than current market thinking (first move in November at the earliest) and the extent of the cuts would be a total of 50bps rather than the market’s current 25bp expectation”.