RBA seen lowering rates to 1.25% by end-2019 – Capital Economics
Ahead of the February 5th Reserve Bank of Australia (RBA) monetary policy meeting, analysts at Capital Economics offer their thoughts on the central bank’s forward guidance.
Key Quotes:
“The RBA will probably reduce its GDP growth forecasts.
But should still signal that the next move in rates will be up.
Our more pessimistic outlook for economic activity, the labour market and inflation suggest that the Bank may instead have to cut interest rates before long.
We believe that the Bank continues to underestimate the threat from the weaker housing market.
Housing downturn and tighter credit conditions will weigh on GDP growth.
Unemployment rate should rise again and wage growth will weaken.
We now expect the Bank to lower interest rates to 1.25% by the end of the year and follow up with an additional 25bp cut in the first half of next year.”