'Less upbeat' RBA gearing for cut

by Adam Smith23 Apr 2012

A "less upbeat" RBA may indicate a strengthening case for a May rate cut.

Westpac chief economist Bill Evans has said the Reserve Bank appears more concerned with economic weakness, a shrinking labour market and business investment, likely foreshadowing a rate cut when the Board meets next week.

"Since July last year, Westpac has forecast that the easing cycle was likely to entail 100bps in reductions in the RBA's cash rate with the final cut occurring in the September quarter of 2012. That forecast remains intact, with our expectation of a 25bp cut on May 1 to be followed by a further move in June or July. It is clear to us that the case for a second cut will be strong, despite the impact of the first
cut on financial conditions," Evans said.

The RBA had previously tipped that it would await fresh inflation data before making any moves to cut the cash rate. CPI data is due 24 April, and Evans said the figures should strengthen the case for a cut.

"The prospect of a CPI print on April 24 that might delay a rate cut seems low," he said.

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