News

NAB forecasts interest rates to stay put until 2020

15 February 2019

Business conditions have remained flat since falling sharply in December according to the recent NAB survey and it has the bank predicting interest rates to be on hold until 2020.

The National bank business survey showed it was the retail sector that was causing the biggest drag on index points.

The weak figures are fuelling increasing predictions of a rate cut, rather than a hike, the next time the Reserve Bank moves on rates.

The NAB, however, are predicting the official cash rate to stay put for some time yet.

“NAB now expects the cash rate to remain unchanged for an extended period with downside risks,” NAB chief economist Alan Oster told Australian Financial Review.

“We have removed our expectation for a rate rise in late 2020 and now expect the cash rate to remain on hold over the forecast horizon.”

“While we don’t think activity in the business sector has crashed, we think there has been some loss in momentum,” he said.

Reserve Bank governor Philip Lowe last week softened his outlook on interest rate hikes, saying the probabilities between an interest rate cut and a hike appear to be more balanced.

The RBA would be softening its outlook on rate hikes because of weak business conditions, falling house prices and stagnant inflation.

Investor home lending data also came out this week that showed loans to investors dropped to a seven-year low in December.

As a result, if economic conditions continue to deteriorate it would give the RBA plenty to think about when it comes to the option of cutting rates.

In its first monetary meeting of the year this month, the RBA kept rates at their record-low 1.5 per cent and forecast the economy to grow at around 3 per cent this year.

 

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