It will be 'awkward' if the RBA doesn't cut rates next month: Westpac

by Julia Corderoy23 Jan 2015
Westpac’s global head of economics Bill Evans said it would be “awkward” if the Reserve Bank doesn’t cut interest rates by 25 bps when it meets for its first board meeting on February 3.

“We expect that by the time of the release of the inflation report next week the case for a rate cut will have been made. The prospect of moving in February should be attractive to the Bank,” Evans said.

“Delaying the move to March, which seems to be favoured by markets, makes the Statement much more awkward, particularly if, as we expect, the bank's inflation forecasts will be lowered significantly.”

Westpac expects the RBA to cut rates twice this year, in February and March, to a new record low of 2%.

Evans’ comments came after falling unemployment and cheaper oil prices failed to resuscitate consumer confidence levels in January, after Decembers “very disturbing” result.

“… when assessed in the context of the sharp 5.7% fall in the Index in December it is not a particularly strong result. The Index is still down by 9.7% on a year ago and really only back at the levels we saw in the immediate aftermath of the Federal Budget when the Index had tumbled by 6.8%,” Evans said of January’s Westpac/Melbourne Institute’s Index of Consumer Sentiment.

“At 93.2 the Index level indicates pessimists still outnumber optimists by a significant majority.”
 

COMMENTS

  • by Incognito 23/01/2015 11:33:04 AM

    When will house prices be included in inflation figures.

  • by Scott Beattie 23/01/2015 11:47:11 AM

    With record profits, I would think that it would be awkward if the banks don't pass on the full rate cut should the RBA drop rates!