RBA cash rate to remain at 1.5% throughout both 2017 and 2018 - Westpac

Sean Callow, Research Analyst at Westpac, points out that Westpac’s base case is that the RBA cash rate remains at 1.5% throughout both 2017 and 2018 and they see risks to this view skewed more to a rate cut than to a hike, as growth in 2018 could disappoint.

Key Quotes

“The RBA held the cash rate at 1.5% in March and maintained a neutral outlook in its statement. This was fully expected.”

“The statement showed increased optimism over the global outlook, reiterating that, “(t)he improvement in the global economy has contributed to higher commodity prices, which are providing a boost to Australia's national income.”

“The RBA noted the strong rebound in growth in Q4 2016 and said “business and consumer confidence are at, or above, average.” But while consumption growth picked up in Q4, “growth in household income remains low.” Indeed, the tone of the minutes was a bit cooler than the statement, including noting weakness in the job market beyond the headline numbers.”

“Markets price only a tiny risk of a cut by September 2017 and then toy with the idea of a rate rise by year-end (10-15% chance).”