The Australian Financial Review reports on comments from “Goldman Sachs Asset Management’s bond expert Phil Moffitt”, speaking at the sidelines of the $935 billion asset managers’ client conference in Sydney:
- The RBA may be forced to cut the official cash rate before the end of the year to beat back of a wall of foreign money that has driven the Australian dollar higher
- Says the confluence of weak domestic growth, an expected fall in inflation as the carbon tax is discarded and the high currency was pointing towards a potential cut in the official rate
- “The game plan has been the RBA to hold rates stable, and accept the currency is overvalued, in anticipation of the Fed moving [to lift US interest rates]”
- “But the more the Fed works to pacify market expectations of a rate rise, the stronger the local currency gets and the harder it is for the RBA to manage”
More:
- Said the Federal Reserve will be forced into raising rates sooner than expected, which should aid the RBA’s desire for a fall in the currency
- But strong demand for Aussie dollar fixed income assets will ultimately prove too much of a force for the central bank to ignore
- A potential fall in the inflation rate later in the year could ultimately set up the RBA to act
- “They may take the opportunity later in the year with inflation coming down because of the [repeal of the] carbon tax and the soft domestic economy to cut rates. That would come at the similar time that we expect US treasury rates to rise”
The full article is at the Australian Financial Review (may be gated): Aussie dollar tipped to force RBA interest rate cut
