RBA to now cut in July - Westpac

Bill Evans, Chief Economist at Westpac, in his latest client note, moved the timing of the next Reserve Bank of Australia’s (RBA) rate cut from August to July.

Key Quotes:

“We have decided to bring forward the timing of the next RBA rate cut from August to July. We are surprised that we have to do this, given that a pause between cuts might have allowed for a smoother transmission process but cannot deny the explicit signals provided in the Governor’s more recent speech.

This includes: that it would “… be unrealistic to expect that lowering interest rates by ¼ of a percentage point will materially shift the path we look to be on”; that “the possibility of lower rates remains on the table”; and that it “is not unrealistic to expect a further reduction in the cash rate.”

These are early days for interpreting this Governor’s language at a time when policy is active. However, based on our experience with other central bankers, this language is direct.

As such, we now expect a cut in July that will substitute for the move we had originally expected in August. This will complete the two cuts we originally forecast on February 21 when markets were priced for only one cut by March 2020. The timing however is somewhat earlier than we anticipated back in February.”