Most economists think the RBA will have to cut rates again

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Courtesy of Wednesday’s incredibly weak March quarter inflation report, next Tuesday’s RBA rate decision now looms as one of the closest calls seen in recent history.

At just 1.55%, the annual increase in core inflation was the lowest on record going back to 1983, sending expectations for a rate cut next Tuesday screeching higher in response.

It has divided rates traders with market pricing currently sitting at 53% in favour of a 25 basis point cut.

Like markets, the economic community has been split when it comes to next week’s meeting.

In a survey of 24 economists polled by Bloomberg, ten are now expecting a rate cut next Tuesday, a significant increase compared to prior surveys.

Here are the bank’s who are calling for a 0.25% rate cut, something that would take the cash rate to 1.75%, the lowest level on record.

AMP Capital Investors
Capital Economics
JP Morgan
Laminar Capital
Macquarie Research
Morgans Financial
National Australia Bank
Standard Chartered

And here are the bank’s who believe rates will be left unchanged come 2.30pm AEST next Tuesday.

BT Financial Group
Commonwealth Bank
Forecast Singapore
Market Economics
Moody’s Analytics
Morgan Stanley
Nomura Australia
RBC Capital Markets
Societe Generale
St George
TD Securities

While a slim majority of economists believe the RBA will leave the cash rate at 2.0% in May, that isn’t the case in the second half where those expecting a rate cut, or two, outnumber those who think policy will be left unchanged.

By the December quarter, fourteen are forecasting that the cash rate will be below 2.0%, with seven predicting that it will sit at 1.5%. Nine believe that it will remain at 2.0% while one, BT Financial Group, predicts that the cash rate will increase to 2.25%.