A preview of the Reserve Bank of Australia meeting on Tuesday February 5 via Capital Economics
The main points in summary:
The RBA will probably reduce its GDP growth forecasts
- but should still signal that the next move in rates will be up
Our more pessimistic outlook for economic activity, the labour market and inflation suggest that the Bank may instead have to cut interest rates before long.
We believe that the Bank continues to underestimate the threat from the weaker housing market
Housing downturn and tighter credit conditions will weigh on GDP growth
Unemployment rate should rise again and wage growth will weaken
Further out:
- We now expect the Bank to lower interest rates to 1.25% by the end of the year and follow up with an additional 25bp cut in the first half of next year
---
RBA announcement is on Tuesday next week
Following that, on Friday. the Bank will issue its latest Statement on Monetary Policy
- this sets out the Bank's assessment of current economic conditions and the outlook
- published four times a year (on the Friday after the policy meetings in February, May, August and November)
