RBA paves the way for early rate cut in 2020

19 December 2019

The Reserve Bank could be laying the groundwork for another interest rate cut early in 2020.

Australia’s central bank say they will reassess the economic outlook at their first meeting next year and market economists say it could mean an early rate cut.

Minutes from the RBA’s December meeting show that updated forecasts will determine whether it cuts the official cash rate to a new record low of 0.5 per cent.

“Members agreed that it would be important to reassess the economic outlook in February 2020, when the bank would prepare updated forecasts,” the minutes said.

Westpac chief economist told Australian Financial Review this week that it’s unusual for the RBA to say that it intends to review policy settings and the outlook and that the RBA would likely cut rates if there was a deterioration in the outlook for growth and unemployment.

“Members noted that weak growth in household income continued to present a downside risk to consumer spending, and that a low appetite for risk could be constraining businesses’ willingness to invest,” RBA minutes state.

“As part of their deliberations, members noted that the board had the ability to provide further stimulus to the economy, if required.”

The RBA has said it did discuss the possibility of cutting rates again in November but has elected to keep them at 0.75 per cent since the last move in October.

Financial markets are predicting around a 50/50 chance of another 0.25 per cent rate cut by the middle of next year.


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