RBA: 50bps in cuts look assured but global factors may require more stimulus – Westpac
|Bill Evans, analyst at Westpac, suggests that the RBA’s forecasts in the August Statement on Monetary Policy are downbeat for wages employment and inflation despite factoring in 50bps of cuts in the cash rate.
Key Quotes
“As such, two moves look assured, consistent with Westpac’s forecast for cuts in October and February. However, if global conditions deteriorate further, more stimulus is likely to be required.”
“The minutes of the Reserve Bank Board meeting for August provided one significant surprise.”
“In the Governor’s decision statement following the meeting on August 6, the conclusion included “the Board would continue to monitor developments in the labour market closely and adjust monetary policy if needed to support sustainable growth in the economy and the achievement of the inflation target over time”. That statement was repeated almost verbatim in the Statement on Monetary Policy on August 9.”
“So the message here is that policy could be eased in response to an unexpected deterioration in the global economy without the labour market providing an adequate justification for a rate cut.”
“Nevertheless we expect that the Board is essentially locked into two more rate cuts regardless of international developments.”
“Consequently we remain comfortable with our call that the next move will be in October – a respectable pause from the last cut in July but never indicating any doubt that another move was required.”
“A second respectable gap between October and February would also indicate a clear intention to move just based on the domestic outlook.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.