The National Australia Bank (NAB) has abandoned its forecast for an additional rate cut from the Reserve Bank of Australia (RBA) this year.
Here’s the reasoning behind the change from the NAB’s chief economist Alan Oster:
The RBA is becoming increasingly focused on financial stability considerations, particularly household balance sheets in the context of a re-acceleration in house price growth in Sydney and Melbourne amidst elevated levels of household debt. Recent comments from RBA officials raise the possibility that macro-prudential measures may be stepped up and we now consider a further rate cut as unlikely in this environment. We have removed our expectation of a 25bp rate cut in late 2017, although continue to flag the risk of further monetary policy easing at some point given our concerns about economic growth and the labour market in 2018.
Only two months ago, the NAB was forecasting two rate cuts from the RBA in 2017. That was tweaked to one rate cut following the release of the bank’s Australian business confidence survey for January one month ago.
That means that all of Australia’s big four banks — the CBA, Westpac, ANZ and NAB — now see rates on hold this year.
Others, such as Goldman Sachs, believe the RBA will start lifting interest rates in November this year.