Shift in RBA’s stance increases chances of rate cuts

The Reserve Bank of Australia (RBA) will almost certainly leave interest rates unchanged at 1.50% at its policy meeting on Tuesday 5th March. While the Bank should reiterate its view that inflationary pressures will continue to strengthen, our view is that GDP growth will fall far short of the Bank’s forecasts. The upshot is that we expect the Bank to cut rates to 1% by the middle of next year, which is lower than what other analysts and the financial markets anticipate.