Major pours cold water on rate cut speculation

by Adam Smith09 Jan 2015
One major bank has poured cold water on the idea of a further RBA rate cut.

Commonwealth Bank economist Michael Blythe has forecast the cash rate to remain on hold for the entire year, Fairfax has reported. While CBA previously predicted a 2015 rate hike, Blythe said the bank has now pushed this projection back.

“It’s now quite likely that the RBA continues to sit on the sidelines through 2015,” he said. “We now see an initial rate rise in the first quarter of 2016.”

Projections that the Reserve Bank would further cut the cash rate thi year “rested on weak foundations”, Blythe claimed.

Blythe said sluggish GDP growth “looks odd relative to other indicators showing a stronger picture”.

“We still expect a fairly modest and drawn-out approach that returns the cash rate to a neutral level of 3.5%,” he said.


  • by MCC 9/01/2015 9:44:19 AM

    Sorry Michael but can you tell us where the jobs are being created to fuel the sustained domestic consumption which our wonderful western economies thrive on? Assuming household consumption still equates to upwards of 55% of GDP in Australia? Falling Government revenues combined with cuts across the board in Government spending is also having a detrimental effect on growth off the back of job uncertainty. Interest rate yield curves & positions don't seem to currently reflect a 'static' position. Mind you I don't think an easing of monetary policy will aid growth. Residential housing construction alone does not make up 100% of Aust GDP.