Bill Evans, analyst at Westpac, notes that the RBA minutes of the September Board meeting indicate that the Board is nearing the time when another rate cut will occur.
“The minutes make a fairly clear case for another rate cut in 2019. With two meetings now having passed since the last move and , from my perspective, most importantly, the key rate cut theme that “ the Australian economy could sustain lower rates of unemployment and underemployment” returning to the narrative, our central view that there is no reason to wait until November for the next move still seems reasonable. November is typically favoured by the RBA since it is a time when it can refresh its forecasts although we are not expecting any significant changes along the lines of August when the forecast unemployment rate was lifted; the forecast pace of wages growth was lowered; and the timing of the return of inflation to the 2–3% band was pushed out by a year. The growth forecast in 2019 is likely to be lowered but the 2020 forecast should remain intact. However, as the minutes warn, “developments in the international and domestic economies, including the labour market” will be assessed to see whether a further easing of policy is “needed. Westpac continues to predict cuts in the cash rate of 25 basis points in both October and February next year.”
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