ANZ revises RBA interest rate cut forecast from November to August

ANZ has shifted its expectations of an RBA rate cut from November to August following yesterday's speech by RBA governor Glenn Stevens.

It brings it into line with the views of most economists as well as the three other major banks.

"[Yesterday's] speech...provided a relatively downbeat view on the Australian economy, and more so than recent communications from the Bank," says Ivan Colhoun, chief economist for Australia at ANZ.

"We now expect the Bank to lower the cash rate by 25 basis points next Tuesday and for the bias to remain for lower rates.

"We had held the view that the August cash rate decision would be a close one but upon reflection and following yesterday's dovish speech by Governor Stevens we have brought forward the cut we had pencilled in for November.

"While we will weigh up the medium-term monetary policy outlook in due course, absent a solid pick-up in business and consumer confidence and non-mining-related spending our view is that the bias remains for a lower cash rate from here, although a lower Australian dollar would also be helpful.

Yesterday the Australian dollar fell almost 1 cent to US$0.9070 and is currently trading at US$0.9030.

Colhoun notes that the implied probability of a rate cut in August increased to around 90% following the Governor’s comments from roughly 75% beforehand.

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Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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