RBA: Rising unemployment rate to drive more rate cuts – Standard Chartered
|Chidu Narayanan, economist at Standard Chartered, expects the Reserve Bank of Australia (RBA) to cut rates three more times this year, versus their previous view of only one more rate cut.
Key Quotes
“We see the RBA cutting rates in July, November and December, taking the policy cash rate down to the likely terminal rate of 0.50%. We have expected the unemployment rate to spike in Q3-2019, necessitating RBA rate cuts, since mid-2018.”
“With the RBA now lowering its expectation on the non-accelerating inflation rate of unemployment (NAIRU) to 4.5% from 5% earlier, we believe the required policy action on a rising unemployment rate will be larger.”
“The hurdle to cut rates below 1% is still quite high, in our view – rates are already at historical lows. The RBA will likely require the unemployment rate to rise close to 5.5% before it cuts rates below 1%. We expect this to happen in Q3, as job losses in construction accelerate.”
“As in the current move, we believe the RBA will not act before it is ready to cut rates twice, given the high hurdle to cut. We forecast the policy rate at 0.50% following consecutive rate cuts in November and December.”
“The RBA has been a reluctant rate cutter, which has been a key factor in our call for delayed rate cuts despite our view of a rising unemployment rate. The RBA’s recent shift – acknowledging softness in the economy, suggesting that the NAIRU is likely lower at 4.5%, combined with the global dovish wave – could push them further lower.”
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.