RBA on hold in 2017, 2018 and 2019 – Westpac
|Markets have moved to price in three hikes for the RBA’s cash rate by end 2019 while other major banks concur broadly with that view, explains Bill Evans, Chief Economist at Westpac.
Key Quotes
“Indeed we are not convinced that the cash rate will need to rise any time throughout the course of 2017, 2018 or 2019.”
“This approach is clearly different to the thinking of the Reserve Bank Governor himself who expects to be tightening over that period.”
“However, we continue to point out that the RBA has a very different growth outlook for the Australian economy and Australia’s trading partners to our own.”
“The RBA expects growth in Australia to be 3.25% in 2018 and 3.5% in 2019 (above trend of 2.75%). Westpac expects a below trend pace of 2.5% in both years.”
“Finally, the ongoing legacy of elevated risk aversion, which continues ten years after the Global Financial Crisis, is contributing to unusually steady interest rates around the world. Under our figuring, on the basis that this risk aversion persists for a few more years, a 40 month stretch of steady rates in Australia would not be out of place.”
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