Two cuts by the RBA won’t be enough

The Governor of the RBA in a speech this week confirmed that the floor for interest rates is 0.25%. While that announcement came as a surprise to some analysts, it was in line with our own thinking. And while the Governor set a high bar for quantitative easing, our view that unemployment will climb further and inflation will fall further below the RBA’s target suggests that the Bank will be forced to begin quantitative easing in 2020.