RBA: A cut is not on the cards - Westpac
Annette Beacher, Chief Asia-Pacific Macro Strategist at Westpac, opined that the Reserve Bank of Australia (RBA) is unlikely to move the rates lower, although could keep the rate at 1.5% for longer.
“A loss of conviction in the Federal Reserve tightening cycle, an escalation of UK Brexit vote woes, and a Chinese growth slowdown all offer an uncertain global backdrop heading into 2019.
Closer to home, house prices have been falling for over a year, and concerns escalated last week when consumer spending growth was markedly absent in the Sep qtr GDP report.
Subsequently, market pressure on the RBA to cut to support house prices and consumer spending has intensified. The OIS strip is currently tracking below the 1.5% cash rate through to Q2 2020.
We are unconvinced that a rate cut can boost house prices, given now-entrenched enhanced ADI prudential supervision. The AUD is calmly trading around $US0.72-0.73 despite global market volatility. We see no need for a cash rate reduction to lower the currency, as trade continues to thrive.
The risk to our base case (November 2019 hike) is skewed towards low for longer for the RBA, staying at 1.5% into 2020.”