Shane Oliver pushes cash rate cut forecast back to later this year

Shane Oliver pushes cash rate cut forecast back to later this year
Staff reporterDecember 7, 2020

Shane Oliver, head of investment strategy and chief economist at AMP Capital, the first major economist to forecast cash rate cuts, has slightly shifted his view saying that we could see the first rate cut pushed back.

His original forecast of multiple 0.25% rate cuts was made back in the first week of December last year.

Since this point a number of economists and institutions have made similar forecasts, including Westpac's chief economist Bill Evans and Alan Oster, NAB's chief economist.

Oliver suggested the first cut would come around June.

Today he suggests it will now come later given some better than expected economic data.

In his original forecast the reasons he gave were a combination of "falling house prices, tightening credit conditions and constrained growth which will keep wages growth weak and inflation below target".

Shane Oliver said, "however, with the RBA still seeing the next move as being up it will take them a while to change their thinking so we don’t see rates being cut until second half next year."

"When it does start cutting the RBA will likely stick to 0.25% increments and since rate moves are a bit like cockroaches there is likely to be more than one." 

He recently revised his forecast.

In the latest weekly report he released Mr Oliver stated, "due to somewhat better economic data lately, tax cuts for low and middle income earners regardless of who wins the election and ongoing RBA optimism about the economy picking up, rate cut expectations have faded a little bit."

"However, while this could see the first rate cut pushed back out a bit we continue to see the RBA cutting rates twice this year as the housing downturn dampens economic growth and keep inflation below target for longer."

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