NAB forecasts successive rate cuts this year following Glenn Stevens' speech on Tuesday which suggests that the Australian economy cannot rely on housing and consumption to plug the growth hole left by the mining boom. The broker expects a 25bps rate cut in August to 2.5% as well as an additional 25bps cut to 2.25% before year end - most likely in November after Q3 CPI data is released. Beyond this, NAB delivers a grim outlook as it expects the Australian economy to continue to grow below trend, income growth to be weak, and the unemployment rate to rise to and possibly above 6.25%. Based on these factors, the broker forecasts that the RBA will retain a bias to ease well into 2014 with a cash rate below 2.25% a real possibility. (VIEW LINK)
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