RBA: Case for cut is still strong – Westpac

Bill Evans, an analyst at Westpac, expects the RBA to decide to cut the cash rate by 0.25% from 1% to 0.75% in October.

• “We thought there a number of good reasons for not moving in May. In particular, the Board did not have an easing bias following its April meeting and moving to cut rates from a neutral bias would be highly unusual.
• However, given the widespread criticism the RBA received from some quarters for not moving in May it is not entirely surprising that the Governor was keen to signal an imminent move when he delivered his speech on May 21. That was supplemented by a clear easing bias in his Statement following the May Board meeting.
• In conclusion, markets were disappointed that the Governor did not give direct guidance in his speech this week along the lines of the speech in May. We assess that having now begun the easing cycle it is appropriate to return to a more opaque approach to future policy movements. However the key domestic theme was similarly emphasised in both speeches while this week’s speech bolstered the case for a cut by highlighting the global developments that are signally the need for lower rates.”