December rate cut unlikely: ANZ

Alistair WalshDecember 8, 2020

The Reserve Bank is unlikely to reduce interest rates again in December, according to ANZ.

Based on minutes from the RBA’s November 1 meeting, during which the board cut rates by 0.25%, ANZ’s Ivan Colhoun says there is no sign the RBA would cut rates again soon.

“There is little in the text or the construct of the RBA's arguments to suggest that the RBA will cut interest rates again as early as December,” Colhoun says.

He says he can foresee only five situations where the RBA might ease rates, including a collapse of global growth from a possible global credit event.

Other events that might encourage the RBA to cut rates would a reduction in the forecast of inflation rates, a cut in forecasts for Australian economic growth independently from global economic developments, substantial cuts by the government in its forthcoming mid-year economic and fiscal outlook, or if the RBA decided that the downside risks to growth continued to increase and was a little less restrictive in terms of its policy settings.

“Our conclusion is that the RBA will likely ease policy a little more but still probably not as quickly as market pricing, abstracting from a significant financial collapse emerging in Europe,” he says.

“The risks to this view still seem tilted to the downside at the present time, but are emerging more slowly than during the GFC.”

 

 

Alistair Walsh

Deutsche Welle online reporter

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