RBA still likely to cut the cash rate on Melbourne Cup Day: Bloomberg survey

Larry SchlesingerDecember 8, 2020

The vast majority of economists still expect the RBA to cut the cash rate by 25 basis points to 3% on Melbourne Cup Day.

Some 20 out of the 27 economists polled by Bloomberg today expect the cash rate to be lowered on November 6 – just one fewer than the 21 who expected a rate cut when polled last week.

However, ANZ remains notably among those expecting rates to stay on hold.

“Following the slightly higher-than-expected third-quarter CPI inflation data last week we pushed back our call for a 25-basis-point cut in the cash rate from November to December," says ANZ.

“We did this not because we don’t think there are good reasons to lower rates now – we certainly do – but because the CPI outcome and somewhat better data flow from overseas complicates the picture.

“The RBA may choose to wait another month by which time they will have further labour market information and a better read on third-quarter GDP growth (from partial indicators).

“Market pricing suggests around a 50% probability of a rate cut next Tuesday,” says ANZ.

The other institutions not tipping a rate cut next week are Barclays Capital, Citi, Goldman Sachs JP Morgan, Merrill Lynch and TD Securities.

Westpac chief economist Bill Evans expects the Reserve Bank to cut the cash rate but highlights that there is considerable uncertainty about the Tuesday decision.

However, he says recent comments by deputy governor Philip Lowe, that the “very low interest rates in many other economies should not be seen as a good thing or something to aspire to” should not be interpreted to mean rates can’t go any lower.

Evans says if there is no move next week and there is no indication in the RBA’s monetary policy statement to the contrary, “then we can only conclude that the [September quarter] inflation report has (in our view unjustifiably) prompted the bank to delay any easing decision until there is more information available including the inflation profile".

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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