RBA to ease further in coming months

We have changed our forecast and now see the RBA moving to cut the cash rate again in the coming […]

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  • We have changed our forecast and now see the RBA moving to cut the cash rate again in the coming months, probably by a cumulative 50 basis points;
  • What has changed is that in recent weeks the RBA has signalled concern about the mix of the sustained drop in commodity and ongoing high AUD;
  • Other factors are tightening fiscal policy, ongoing weakness outside of mining (notably in residential housing and small business), and the medium term headwinds of the approaching end of investment boom in the resource sector;
  • A rate cut as early as next month is possible, but in our judgement developments in recent weeks have been sufficiently positive for the RBA to retain a measured approach to any additional ease. Our forecast now has a 25bps cut in November and then again in February, although actual timing will be data dependent.

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