The number of analysts calling for further rate cuts from the Reserve Bank of Australia (RBA) continues to dwindle with RBC Capital Markets the latest to pull its call for further easing.
Su-Lin Ong, RBC’s chief economist, explains:
We now expect the cash rate to finish 2017 at 1.50% and remain there throughout 2018. We abandon a final cut as the hawkish shift in the global central banking cycle overwhelms the challenging domestic outlook with below trend growth and sub target inflation set to persist. The RBA will find it difficult to move in the opposite direction.
So likely policy normalisation from other major central banks such as the ECB, BoE and BoC led to the group pulling it call, but it doesn’t see the RBA turning hawkish like them anytime soon.
“Our macro outlook coupled with likely further tightening in financial conditions argues against policy normalisation in Australia,” says Ong.
“A number of domestic challenges lie ahead including a peak in residential construction, lower house price growth, tighter financial conditions and constrained households.
“Growth will likely continue to disappoint the RBA in a familiar pattern of the last few years.”
With RBC abandoning its call, that leaves JP Morgan and Nomura as the only groups still forecasting rate cuts of the 24 economists polled by Bloomberg.