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We continue to expect further cuts, with 25bp reductions in April – Westpac

Analysts at Westpac note the forthcoming Reserve Bank of Australia meeting.

Key notes

  • Feb 4, Last: 0.75%, WBC f/c: 0.75%Mkt f/c: 0.75%, Range: 0.50% to 0.75%.

The RBA left the cash rate on hold at its December meeting but retained a clear easing bias, the Governor'sdecision statement noting the Board “continues to monitor developments, including in the labour market”, and “is prepared to ease monetary policy further if needed.”

Developments since December meeting – including a disappointing Q3 national accounts update, the bushfire emergency and the coronavirus outbreak – will reinforce the bank's easing bias but with key labour market data holding up better than expected a February rate cut looks unlikely.

 We continue to expect further cuts, with 25bp reductions in April and August followed by amove to quantitative easing measures sometime thereafter.

 Note that the RBA's February Statement on Monetary Policy is also due to be released on Feb 7 and will include updated economic forecasts. The RBA Governor is also due to speak on Feb 5, topic: "The Year Ahead".

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