Cup Day is next "live" meeting, but Westpac's Bill Evans expects a hold decision

Cup Day is next
Cup Day is next "live" meeting, but Westpac's Bill Evans expects a hold decision

The next ‘live’ RBA meeting will be November 1, Bill Evans, Westpac's chief economist suggests.

However he expect rates will be held steady in November as well as October.

The Reserve Bank Board next meets on October 4, the first meeting under the new Governor Philip Lowe.

"It is extremely unlikely that there will be any change to rates at that meeting.

"Since the cash rate returned to its historical low of 3 percent in 2013 all six subsequent cuts have occurred at meetings in February, May, August or November when the Bank has a ‘fresh’ print on inflation and is able to communicate any forecast changes in its quarterly Statement on Monetary Policy.

"Signs of stability in the real economy point to steady rates being the most appropriate policy.

"Of course there is always the possibility of a shock from the inflation report on October 26 but both our inflation forecasts and our assessment of current high RBA ‘inertia’ around moving again this year point to stability in November," he said.

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Cup Day is next


Evans noted the six month annualised growth rate in the WestpacMelbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, rose from –0.01 percent in July to +0.20 percent in August.


He said the August reading is consistent with a trend that has been building for some months now.


"The positive Index growth rate follows 15 consecutive months where growth has been below trend.


"It is the first above trend result since early last year and the second strongest since December 2013.


"The Leading Index is clearly signalling that the economy is likely to continuing growing around its long run trend rate of about 3 percent a year.


"That outlook is consistent with Westpac’s forecast for growth holding steadily around a 3 percent pace over the course of both this year and next."


The Leading Index growth rate has lifted sharply over the course of 2016, from a 1.44 percent below trend reading in March to 0.20 percent above trend in August.


Almost all components have contributed to the improvement. The biggest lift has come from: commodity prices (+0.64ppts).


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