“Persistently low inflation will force the Reserve Bank of Australia to cut rates twice more in 2017 to 1 per cent”, says NAB
“With inflation forecasts still very low and the RBA showing its hand as a committed ‘inflation targeter’, it is seemingly less worried than we thought about using up some of its valuable remaining monetary policy ammunition, the case for further cuts from the RBA appears to be mounting,” Mr Alan Oster NAB’s chief economist.
In its recent quarterly statement, the RBA said it expected inflation to remain below the bottom of its 2-3 per cent target band until mid-2018, despite cutting rates to 1.5 percent on August 2 – a move NAB’s economics team was not expecting.
The central bank also indicated that it believed the risk of runaway house price growth had diminished and that monetary policy continued to be effective in stimulating economic growth in Australia.
All of which added up to a strong case for further easing, Mr Oster said.
“This will include two more 25 basis point cuts in May and August 2017 (to a new low of 1 per cent), which should be enough to stabilise the unemployment rate (which is currently a concern for the RBA) at just over 5½ per cent.
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