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5 May 2015
RBA to cut rates by 0.25bp - BofA
FXStreet (Bali) - Bank of America expects the RBA to cut rates by 0.25bp to 2% on Tuesday, adding that although the Bank will likely continue to hold an easing bias, 2% will represent the bottom of this policy cycle.
Key Quotes
"Since the RBA resumed its easing cycle in February, intense focus has been on the timing of any potential follow-up rate cut. Yet both economists and markets have struggled recently to accurately forecast the RBA’s month to month intentions. And this is despite the Bank holding a clear easing bias."
"In our view, the delay in cutting further comes because of the predicament the RBA finds itself in. In the current environment, easing rates further likely brings limited reward. But it would almost certainly bring increased risks."
"The reward is potentially, but likely marginally, bolstering growth in the economy. The risks over the medium term are pushing dwelling prices too high and potentially encouraging households to overleverage. After weighing up this trade-off we expect that RBA will cut rates again at its May meeting. And although the Bank will likely continue to hold an easing bias, we expect that 2% will be the bottom of this policy cycle."
Key Quotes
"Since the RBA resumed its easing cycle in February, intense focus has been on the timing of any potential follow-up rate cut. Yet both economists and markets have struggled recently to accurately forecast the RBA’s month to month intentions. And this is despite the Bank holding a clear easing bias."
"In our view, the delay in cutting further comes because of the predicament the RBA finds itself in. In the current environment, easing rates further likely brings limited reward. But it would almost certainly bring increased risks."
"The reward is potentially, but likely marginally, bolstering growth in the economy. The risks over the medium term are pushing dwelling prices too high and potentially encouraging households to overleverage. After weighing up this trade-off we expect that RBA will cut rates again at its May meeting. And although the Bank will likely continue to hold an easing bias, we expect that 2% will be the bottom of this policy cycle."