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20 Apr 2015
RBA remains on track for a May rate cut - Westpac
FXStreet (Bali) - Bill Evans, Chief Economist at Westpac, notes that the RBA remains on track for a May rate cut, a move consistent with a cautious approach near the end of a long easing cycle.
Key Quotes
The Reserve Bank Board next meets on May 5, one week before the announcement of the Commonwealth Budget. On December 4 last year we forecast that the Bank would cut rates twice in two 25bp tranches beginning in February 2015.
We expected, at the time, that because it was clear that a total of at least 50bps would be needed, the second move would come in March. Readers will be aware that the Bank is still to deliver the second tranche.
"Delaying the decision until May is consistent with a cautious approach near the end of a long easing cycle. The unexpected 21% fall in the iron ore price with its associated implications for the terms of trade and nominal income growth strengthens the case for more rate relief."
"Further complicating the picture has been the sudden jump in the AUD to near USD0.78 in the aftermath of the March Employment Report. Markets have sharply lowered the probability of a move in May. We doubt such a response given the complication of a revised seasonal treatment and the well – established observation that the RBA has rarely changed policy on the basis of a single Employment Report."
Key Quotes
The Reserve Bank Board next meets on May 5, one week before the announcement of the Commonwealth Budget. On December 4 last year we forecast that the Bank would cut rates twice in two 25bp tranches beginning in February 2015.
We expected, at the time, that because it was clear that a total of at least 50bps would be needed, the second move would come in March. Readers will be aware that the Bank is still to deliver the second tranche.
"Delaying the decision until May is consistent with a cautious approach near the end of a long easing cycle. The unexpected 21% fall in the iron ore price with its associated implications for the terms of trade and nominal income growth strengthens the case for more rate relief."
"Further complicating the picture has been the sudden jump in the AUD to near USD0.78 in the aftermath of the March Employment Report. Markets have sharply lowered the probability of a move in May. We doubt such a response given the complication of a revised seasonal treatment and the well – established observation that the RBA has rarely changed policy on the basis of a single Employment Report."