Westpac sticks with interest rate cut prediction, with December expectations

On the back of the release of the August 2 RBA minutes, Westpac has stuck with its view that rates will fall, now saying the cut is likely in December.

The bank was the first of the majors to forecast a drop in interest rates this year, when it stepped out on its own in July.

“We remain comfortable with our view that the RBA will be lowering interest rates over the year ahead with a first move expected in December,” write Westpac senior economists Matthew Hassan and Andrew Hanlan.

The economists say the minutes give voice to an “alternative, more dovish scenario”.

“It's noted that the "downside risks to demand have probably increased," as a result of the "acute uncertainty in global financial markets over the recent period".

“The minutes then go on to set out the downside risk in more detail with the impact of escalating turmoil on confidence and demand the main risk to the growth and inflation outlook.

“Given the continued uncertainty globally, and the more questionable pace of demand domestically the Board is likely to again opt to leave rates unchanged in September.”