Australia: RBA to cut rates in March and April – Standard Chartered

The Reserve Bank of Australia (RBA) is now likely to cut rates in March and April. Even if RBA holds in March, ‘act as appropriate’ stance may keep cumulative cuts priced in the curve intact, strategists at Standard Chartered bank apprise.

Key quotes

“We bring forward our rate-cut expectations from RBA following developments over the weekend. We still forecast two 25bps rate cuts from the RBA in 2020, but we now see them in March and April; we had earlier expected rate cuts in April and Q3.” 

“The dovish Fed statement, much-weaker-than-expected China PMI data, and worsening data on the spread of the coronavirus in Australia are likely to trigger a move earlier than later.” 

“We still expect the central bank to embark on quantitative easing (QE) after hitting the cash rate floor of 0.25%, but continue to believe this will come only by end-2020 or later.”

“We forecast Q4-2019 GDP growth of 0.3% q/q (1.8% y/y), lower than consensus expectations of 0.4% q/q (2% y/y).” 

“Risk sentiment is likely to be a bigger driver for the AUD. Central bankled support may offer some short-term respite but may be insufficient to lead to medium-term gains in the face of a worsening global and domestic growth outlook.”