Another big bank predicts rate cut change

by AB19 Mar 2014
Macquarie Bank has followed in the footsteps of Westpac to revise its forecast for further rate cuts from the Reserve Bank.

The bank has moved from an expectation of two reductions to interest rates this year to one.

Macquarie’s economics team, led by Richard Gibbs, released a report which referred to an improving economy, boosted by a recovering domestic housing construction market.

“Assuming a relatively moderate amount of fiscal tightening in the 2014 federal budget and some further upward drift in the unemployment rate, we view the scope for two further cuts to official interest rates as having narrowed in the past month,” the bank said.

Macquarie has 2.25% as its bottom of the cycle level for interest rates, with a final cut factored in for the third quarter of this year.

The bank follows Westpac, which had previously predicted two further rate cuts before the end of 2014. But on Monday chief economist Bill Evans pulled an about-face, and instead forecast that the RBA will remain on the sidelines for the rest of the year.

Instead, Evans has forecast the beginning of a new tightening cycle, with the first 25bp interest rate hike occurring in the third quarter of next year.

However, the release of the RBA minutes from the March meeting saw the central bank reiterate its view that official interest rates are likely to be kept unchanged for a time before the bank considers an increase.


  • by greg 19/03/2014 9:11:24 AM

    Never ever believe economists.
    80% of time wrong and would cost me money if followed their expert forecasts.

  • by Wombat 19/03/2014 10:06:00 AM

    Ask 10 economists for their predictions, and you'll get 10 different answers. Which economist (or bank) predicted the GFC? Even the great RBA got that terribly wrong and had to take urgent remedial action to reverse its cycle of constant rate increases.

  • by Chris 24/03/2014 9:51:00 AM

    Economics is like an exam with no wrong or right answer, just write something as long as you can state a point with whatever data you have to try and back an argument, no matter how far fetched it maybe...just not worth the time or this comment really!