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Financial News: Westpac: RBA To Cut Key Rate By 25

Westpac: RBA To Cut Key Rate By 25 Bps On July 2

07/01/2019 - 10:41:00 (RTTNews)

(RTTNews) - The Reserve Bank of Australia is set to slash its cash rate by 25 basis points to 1 percent on Tuesday, Westpac said in a weekly note.

Economists Bill Evans and Matthew Hassan said they had brought forward the timing from August to July mainly due to explicit signals from RBA Governor Philip Lowe, which they described as "unusually direct".

"It is about as far as the Governor can go with forward guidance given that he cannot pre-commit to a decision that is decided by the RBA Board as a whole," the Westpac economists said.

They said the RBA communication accompanying the decision will be of close interest as the bank may re-craft the wording in the statement if policymakers expect "a different tempo and conditionality around future moves."

Westpac expects the RBA to focus more on macroeconomic forecasts beyond July, and is likely to leave them unchanged in the August policy statement. However, the economists added that downside risks to the outlook have increase due to the government's intense focus on reducing the unemployment rate.

In May, RBA forecast 2.75 percent growth this year and next and core inflation climbing to 2 percent next year from 1.75 percent this year.

"Beyond July we continue to expect a further 25bp cut with November the most likely window for a final move taking the rate to 0.75 percent," Evans and Hassan said.

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