RBA: Markets price only a small risk of a cut by June 2017 - Westpac
Sean Callow, Research Analyst at Westpac, notes that the RBA held the cash rate at 1.5% in February and maintained a neutral outlook in its statement which was fully expected.
Key Quotes
“Perhaps most notable in the statement – later reinforced in the quarterly SoMP – was a more upbeat view of the global economy: “The improvement in the global economy has contributed to higher commodity prices, which are providing a boost to Australia's national income.” GDP growth is expected to rebound after the weak Q3 reading.”
“Westpac expects that the labour market – rather than inflation - will be key to whether there is a rate cut in 2017. Our base case is that the cash rate remains at 1.5% throughout both 2017 and 2018. We see risks to this view skewed more to a rate cut than to a hike, as growth in 2018 could disappoint.”
“Markets price only a small risk (about 10-15%) of a cut by June 2017 and then toy with the idea of a rate rise by year-end (also 10-15% chance).”
Author
Sandeep Kanihama
FXStreet Contributor
Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.
