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Rates may fall to 0.75%

The Reserve Bank of Australia (RBA) has telegraphed that it will cut interest rates to 1.25% in June and we think it will follow up with another 25bp cut in August. But we suspect that further easing will be needed to lift GDP growth towards potential and return underlying inflation to target. We expect the RBA to cut rates to 0.75% by year-end.
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More from Australia & New Zealand

Australia & New Zealand Data Response

Australia Retail Sales (May 2022)

The strong rise in retail sales in May highlights the strength in the Australian economy and is consistent with our view that the RBA will continue to hike rates aggressively in the months ahead.

29 June 2022

RBA Watch

RBA to keep hiking by 50bp for now

The Reserve Bank of Australia will probably lift the cash rate by another 50bp in July and August before reverting to smaller 25bp hikes. However, the risks are tilted towards a prolonged period of aggressive tightening and rates may well peak above our current forecast of 3%.

28 June 2022

Australia & New Zealand Economics Weekly

More 50bp hikes coming

We agree with RBA governor Phillip Lowe that market pricing for the Cash rate looks too aggressive. But we also think the consensus is still too dovish. After all, Governor Lowe is starting to grow concerned that wage growth will be too strong to allow the Bank to meet its target. And the RBA is still lagging behind a number of its peers in its hiking cycle. We therefore expect the RBA to hike rates to a peak of 3.1%, higher than the analyst consensus of a peak of 2.60%.

24 June 2022

More from Capital Economics Economist

Japan Data Response

External Trade (May)

The wider trade deficit in May was a result of a sharp fall in exports and a slight fall in imports. Although export volumes are unlikely to be as weak as they were in the last quarter, a likely rebound in import volumes means that net trade should turn into a drag on GDP growth in Q2.

19 June 2019

Emerging Asia Economics Update

What would US rate cuts mean for Asia?

Expectations that the US will soon start to cut interest rates have provided a boost to Asian currencies in recent weeks. But if we are right that slowing growth in the US and the escalating trade war will cause investors to become more risk averse, Asian currencies are likely to come under renewed downward pressure. The prospect of further falls in the rupiah is the key reason why we don’t think Bank Indonesia will follow other central banks in the region in cutting interest rates this year.

18 June 2019

Emerging Asia Data Response

Philippines Current Account (Q1), Remittances (Apr.)

The current account deficit of the Philippines widened again last quarter and is likely to remain a key source of vulnerability over the coming year.

17 June 2019
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