The ANZ Economics team now believes that the RBA will need to cut rates twice in 2016, taking the cash rate to a new modern-day low of 1.5%.
Key to the ANZ’s call for lower rates are two key factors which will require extra policy support.
Those factors are that “risks to global growth remain to the downside, while housing market activity and the weakness in the AUD will have a diminishing impact on the domestic economy as they start to slow,” ANZ currency strategist Daniel Been wrote.
Naturally that will put further pressure on the Aussie dollar.
Been released a note yesterday to accompany the new interest rate forecast, which has downgraded the bank’s forecast for the Aussie in 2016.
“We take a further 3 cents off of our terminal AUD forecast and expect the AUD to be at USD0.64 by the middle of 2016,” Been wrote.
That’s consistent with Been’s note last week which highlighted that the Aussie is in a mode which is historically consistent with further overshooting to the downside. At the time he said 60 cents was possible.
It seems the current outloook supports that.
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