The RBA will reduce the official cash rate twice in 2019, according to NAB economist Alan Oster. This follows a similar prediction from Westpac that the Reserve Bank will cut the official rate twice this year.
Oster says economic growth appears to have lost some of its momentum, at a time when inflation poses little constraint on policy and financial stability risks have abated.
“We have penciled in one cut to 1.25% in July and a further cut to 1% in November,” he says. “We see the timing of a rate cut as very data dependent. Any deterioration in the labour market would lead to cuts and this could happen earlier than the financial market currently anticipates.”
Oster says the RBA outlook for a further fall in unemployment to gradually lift wages and ultimately inflation is in doubt. “We , therefore, expect the RBA to provide some further support to the economy in the form of lower interest rates,” he says.
“Last month we removed our expectation for any increase in the cash rate over the next 18 months. Even when judged against the RBA’s relatively positive outlook for growth and good labour market outcomes, there seemed little case for a near-term increase.”