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2 Mar 2015
RBA rate cut in March likely - ING
FXStreet (Barcelona) - James Knightley, Senior Economist at ING, comments that after cutting rates 25bp in February the balance of risks points to further policy easing at this week’s RBA meeting, anticipating the central bank to cut rates further by 25bps in tomorrow’s meeting.
Key Quotes
“Following the February rate cut, the RBA stated that “growth is continuing at a below trend pace, with domestic demand growth overall quite week”. This has led to an increase in unemployment with output likely to “remain a little below trend for somewhat longer… than earlier expected”.”
“Since that meeting home sales, retail sales, business surveys, employment data and vehicle sales have all come in weaker than anticipated. Meanwhile the currency has actually appreciated marginally even though the RBA stated that the Australian dollar “remains above most estimates of its fundamental value” and that “a lower exchange rate is likely to be needed to achieve balanced growth in the economy”.”
“With investment spending on a clear downward trend in response to the plunge in prices of Australia’s key commodity exports, there is concern that this will translate into further job losses and weaker consumer spending activity. This is also likely to lead to a cooling of the buoyant property market.”
“Furthermore, the weakness in last week’s Capex intentions survey for the non-mining part of the economy is adding to the gloom.”
“Consequently, we favour a further 25bp rate cut to try and support growth. With inflation set to fall much further on the back of the lower oil price we feel that the RBA has clear room for manoeuvre.”
Key Quotes
“Following the February rate cut, the RBA stated that “growth is continuing at a below trend pace, with domestic demand growth overall quite week”. This has led to an increase in unemployment with output likely to “remain a little below trend for somewhat longer… than earlier expected”.”
“Since that meeting home sales, retail sales, business surveys, employment data and vehicle sales have all come in weaker than anticipated. Meanwhile the currency has actually appreciated marginally even though the RBA stated that the Australian dollar “remains above most estimates of its fundamental value” and that “a lower exchange rate is likely to be needed to achieve balanced growth in the economy”.”
“With investment spending on a clear downward trend in response to the plunge in prices of Australia’s key commodity exports, there is concern that this will translate into further job losses and weaker consumer spending activity. This is also likely to lead to a cooling of the buoyant property market.”
“Furthermore, the weakness in last week’s Capex intentions survey for the non-mining part of the economy is adding to the gloom.”
“Consequently, we favour a further 25bp rate cut to try and support growth. With inflation set to fall much further on the back of the lower oil price we feel that the RBA has clear room for manoeuvre.”