NAB add extra cut forecast in November to take rate down to 0.75%

NAB add extra cut forecast in November to take rate down to 0.75%
NAB add extra cut forecast in November to take rate down to 0.75%

The NAB have changed their cash rate forecast call to include an extra cut in late 2019.

They now believe the official cash rate from the RBA will drop to 0.75%, scheduling in another rate cut in November, following a cut in August.

"While heavily data dependent, we have tentatively placed the cut in November," NAB senior economist Alan Oster said.

"We also think that lower interest rates will be supported by fiscal stimulus later this year."

The view joins that of Westpac's Bill Evans, who penned in two rate cuts in June and August before adding November to their cut forecast.

Before June's rate cut, NAB said that the at the next three RBA meetings there will be a real possibility for three cuts.

The RBA cut the cash rate at the June meeting for the first time in nearly three years to a historic low 1.25%.

Oster said they can't predict whether the next cut will be in July or August.

NAB add extra cut forecast in November to take rate down to 0.75%

"On the question of a July or August cut that is very hard – and to a large extent is less relevant for the economic outlook," Oster noted.

"On the one hand given a starting point problem (i.e. the economy is weaker than the RBA expected and continues to lose momentum) the RBA should probably get on with the cutting cycle. 

"On the other hand, there does seem to have been a post- election boost to confidence and it is too early to assess if that has flowed into activity in any sustained way. 

"Also back to back cuts could send a strong signal that the economy has bigger problems than we thought.  On balance we have opted to stay with our August cut forecast – but would not at all be surprised by a July move. 

Oster said that the possibility of alternative monetary action in early 2020 can not be ruled out.

"The forecast of a larger reduction in interest rates reflects our judgment that the economy is losing momentum and is weaker than reflected in the Reserve Bank’s recently downgraded near-term growth outlook," Oster suggested.

"The loss of momentum is apparent in private demand, which has barely grown over the past year, and more timely indicators, such as the NAB business survey and internal data, which point to a weaker labour market and entrenched weakness in spending.   

"The Reserve Bank Board said when cutting rates earlier this month that the lower cash rate would help make further inroads into spare capacity and “achieve more assured progress towards the inflation target”, with Governor Lowe emphasising that the cut did not reflect a weaker outlook for the economy. 



Joel Robinson

Joel Robinson

Joel Robinson is a property journalist based in Sydney. Joel has been writing about the residential real estate market for the last five years, specializing in market trends and the economics and finance behind buying and selling real estate.

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