Forex Flash: RBA to cut its policy rate by 25bp in Q1 - Nomura (Barcelona) - Based on Nomura analysis conclusion over the present 'state of affairs' in Australia, the bank forebodes that the new neutral rate in Australia should now be between 3% and 4%.

According to Charles St-Arnaud and Martin Whetton, Nomura's economist and strategist respectively:

"In a context where growth has been below potential in recent quarters and where the unemployment rate has been increasing, one can argue that the current policy stance is not very stimulative despite the 175bp of cuts over the past year and a half, and suggests that the neutral rate is likely closer to the lower bound of the estimated range."

"We currently expect the RBA to cut its policy rate by 25bp in Q1 to provide further stimulus to the economy, but the lower neutral rate means that the central bank would likely need further rate cuts if growth comes in slower than expected or if we see further headwinds to growth" Nomura analysts add.