Bill Evans, chief economist at Westpac, points out that the RBA Board decided to lower the cash rate by 25bps to 1.25% and the basis for the decision was “to support employment growth and provide greater confidence that inflation will be consistent with the medium-term target”.
Key Quotes
“The major dynamic in that regard is to push harder on the unemployment rate to try to reach that point where wages growth lifts markedly.”
“The Governor has left open the prospect of further action, noting that “the Board will continue to monitor developments in the labour market closely and adjust monetary policy to support sustainable growth in the economy and the achievement of the inflation target over time”.”
“In February, Westpac surprised markets by forecasting two rate cuts in 2019. Recently we revised that forecast to anticipate three cuts. Today’s decision confirms the validity of those forecasts and goes some way to justifying our decision to increase the number of forecast cuts from two to three.”
“The labour market will remain the key focus for the policy profile, and the two additional cuts that we anticipate in August and November are consistent with our more downbeat view on the labour market.”
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