The Reserve Bank of Australia has pledged to cut interest rates if the unemployment rate rises. But when exactly will it happen? The timing impacts AUD/USD.
Here is their view, courtesy of eFXdata:
NAB Research discusses its latest change for the RBA cash rate call which now sees the central bank cutting to 0.75% in November.
“We have changed our view on the cash rate, to include an extra cut in late 2019 – while heavily data dependent we have tentatively placed the cut in November. We also think that lower interest rates will be supported by fiscal stimulus later this year. We would not rule out the possibility of alternative monetary action in early 2020, in addition to further rate cuts, if the economy remains very subdued, but have not put it into our projections.
On the question of a July or August cut that is very hard – and to a large extent is less relevant for the economic outlook. On balance we have opted to stay with our August cut forecast – but would not at all be surprised by a July move. It is, in short, a very finely balanced judgment. And it will probably be the case that Governor Lowe will talk about the need for more action when he speaks on “The labor market and spare capacity” on 20 June,” NAB projects.
“Beyond August, we have penciled in a third rate cut to 0.75% in November and fiscal stimulus by late this year. Alternative monetary policy options might be considered next year if these measures fail to have much effect,” NAB adds.
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