RBA: Expect the cash rate to be kept at 1.5% into 2017 - Westpac

Sean Callow, Research Analyst at Westpac, notes that the RBA cut the cash rate in Aug to 1.5%, its second easing of the year, with both following very low inflation readings (albeit Q1 more dramatic than Q2).

Key Quotes

“While the RBA’s statement did not include a policy bias beyond the cut (standard practice), its Aug quarterly statement projected sustained low inflation that leaves the door open for yet more easing at some point. Core CPI is only seen returning to the bottom of the RBA’s 2-3% band by June 2017 and not rising from 2% (mid) even by Dec 2018.

Westpac expects the cash rate to be kept at 1.5% into 2017 but we can understand why interest rate futures imply a 55-60% chance of a rate cut by end-2016 and don’t expect this to change greatly near term.”