Two rate cuts in next six months: ANZ

The Reserve Bank will cut interest rates twice before the end of March 2012, according to ANZ.

The bank has shifted its position in light of the change of tone evident in the most recent monetary policy statement following the decision to keep rates on hold in October.

In July, following the release of higher than expected CPI figures, ANZ had forecast a 25 basis points rise before the end of the year.

“Whilst the timing is usual, highly uncertain, out best estimate at the moment is for a 25bps cut in November, followed by a further 25bps cut in February,” the bank says.

ANZ expects third-quarter inflation data, to be released at the end of October, to confirm that domestic inflationary pressures aren’t as high as previously thought, giving the RBA a window for a November rate cut.

“For now, we forecast an initial 25bps easing, but we can’t completely rule out a 50bps easing in November, should global credit markets deteriorate even more sharply and quickly in the coming weeks,” ANZ says. 

The bank says the RBA opened the door for a modest easing of policy when it lowered both its short-term growth and 2012-13 inflation forecasts for Australia.

“As a result of these downgrades, the RBA acknowledged that it now had scope for monetary policy to ‘provide some support to demand’ should that prove necessary,” ANZ says.