RBA: Rate cuts coming in November, December – Standard Chartered
|Chidu Narayanan, economist at Standard Chartered, notes that the Reserve Bank of Australia (RBA) has acknowledged that chances of a rate hike and rate cut are now evenly balanced.
Key Quotes
“We still expect slowing construction activity to weigh on job creation in Q3. A spike in unemployment, combined with worsening consumer sentiment, would force the RBA to move, in our view, with rate cuts at consecutive meetings (in November and December).”
“We had previously expected a prolonged pause. We also lower our growth and inflation forecasts to 2.7% and 2.2%, respectively, in both 2019 and 2020.”
“The labour market will be the key driver for an RBA rate cut.”
“The RBA’s hurdle to cut rates remains high; it is unlikely to cut rates unless conditions deteriorate significantly. A worsening labour market, which has been a source of strength for the RBA so far, will likely provide the ballast to change course.”
“We expect the first rate cut in November, as the unemployment rate starts ticking up, and a subsequent rate cut at the following meeting. The risk is that the first cut is delayed; however, we expect back-to-back rate cuts from the RBA once it begins.”
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