The RBA has no choice but to announce a rate cut this year. Is it certain that the RBA will cut interest rates this year?

Published: Jun 04, 2019 14:50 (GMT+8)

SMM6, April 4: today, the RBA announced the latest interest rate resolution, the RBA cut the cash rate by 25 basis points to 1.25%, a record low, this is the RBA cut interest rates for the first time in nearly three years, but in line with market expectations.

This rate cut is widely expected. The minutes of the RBA meeting released in May showed that it was appropriate to lower cash interest rates when inflation stopped rising and unemployment rose. Australia's unemployment rate stood at an eight-month high of 5.2 per cent in April, while inflation was just 1.3 per cent in the first quarter, the lowest since the third quarter of 2016, according to the data. At the time, the Federal Bank of Australia, Royal Bank of Canada and other banks predicted that the RBA would cut interest rates in June and August.

In its monetary policy statement, the RBA said the interest rate changes are aimed at supporting sustainable economic development, making further use of spare capacity, and building confidence on inflation. The economy is expected to grow by around 2.75% this year and next, with core inflation of 1.75% in 2019 and 2% in 2020, the statement said.

On the morning of May 8th, the New Zealand Fed first cut interest rates in developed countries, cutting interest rates by 25 basis points, with the latest official discount rate of 1.5 per cent at an all-time low. New Zealand and Australia as neighbors, the economic situation of the same line, in the face of the same external pressure and domestic economic downturn, property prices fell, when market participants expected both countries to cut interest rates in May. I didn't expect the RBA to stand still last month. After all, by June, interest rate cuts were unstoppable, and when inflation was depressed again and again, interest rate cuts naturally became one of the options.

At present, only Australia and New Zealand are cutting interest rates in developed countries, but do not forget that the euro zone is still in the QE, interest rates have reached zero can not be refunded; The United States is also not optimistic. The market expects the Federal Reserve to cut interest rates by about 60% in July, 88% in September, and nearly 98% in December. In addition, JPMorgan Chase and Barclays expect to cut interest rates twice this year. Barclays even expects the Fed to cut interest rates by 75 basis points this year, and a wave of rate cuts is expected to break out by the end of the year.

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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