3 Feb 2015
Expecting 50bp of RBA cuts in H1 - Nomura
FXStreet (Bali) - Nomura is forecasting 50bp of RBA cuts in H1, quite an aggressive prediction, adding that the first rate cut could come today.
Key Quotes
"Our central case has been the Reserve Bank would most likely leave the cash rate unchanged at 2.5% throughout 2015. This view was based on our judgement that the domestic dataflow has been mixed, rather than weak and our forecast that the AUD will fall to around 77 cents by mid-year, helping the economy to rebalance, and effectively “doing some of the RBA’s work for it”.
"However, the atmospherics are evolving quickly and we are clearly in an environment where central banks need to be, and are choosing to be, nimble. In the past week, we have seen global and Chinese growth downgrades by the IMF, rate cuts in Switzerland, Denmark and Canada and weaker-than-expected inflation in New Zealand. Market volatility has risen over the past month, and we expect the ECB to announce a substantial new QE program in the next 24 hours."
We now forecast 50bp of rate cuts by the Reserve Bank of Australia in the first half of this year. As we assess the arguments for a move (below) we conclude that a rate cut could come as soon as February."
Key Quotes
"Our central case has been the Reserve Bank would most likely leave the cash rate unchanged at 2.5% throughout 2015. This view was based on our judgement that the domestic dataflow has been mixed, rather than weak and our forecast that the AUD will fall to around 77 cents by mid-year, helping the economy to rebalance, and effectively “doing some of the RBA’s work for it”.
"However, the atmospherics are evolving quickly and we are clearly in an environment where central banks need to be, and are choosing to be, nimble. In the past week, we have seen global and Chinese growth downgrades by the IMF, rate cuts in Switzerland, Denmark and Canada and weaker-than-expected inflation in New Zealand. Market volatility has risen over the past month, and we expect the ECB to announce a substantial new QE program in the next 24 hours."
We now forecast 50bp of rate cuts by the Reserve Bank of Australia in the first half of this year. As we assess the arguments for a move (below) we conclude that a rate cut could come as soon as February."