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Deutsche Bank (DB) anticipates an interest rate cut from the Reserve Bank of Australia (RBA) after its latest monetary policy meeting keeps the door open for further easing. The bank termed the extension of the term funding facility as not very stimulatory and risking being not enough to highlight their points.

Key quotes

Lowering the cash rate and three-year AGS target to 0.1% now looks likely.

We expect that to be installed by February, but do not rule it out before the end of this year.

An expanded QE programme focussed on the five to ten year part of the AGS curve looks increasingly possible, though we fall short of including that in our baseline for now. 

A negative cash rate looks increasingly less improbable. The RBA’s self-imposed hurdle to a negative policy rate is high, but is not insurmountable. .. extended term funding facility helps remove some barriers …  The earliest we could see a negative policy rate being installed is mid 2021. But again, and despite our previously stated preference for a negative rate policy, we fall short of including that in our baseline for now.

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