Mike had the headline: Westpac sees RBA cutting interest rates in Feb and March 2015

More now:

  • Westpac has revised its profile for the RBA cash rate
  • While we still expect rates to be on the rise in 2016 as the world economy gathers considerable momentum, we now expect the RBA to cut rates further in the early months of 2015 in an effort to bolster domestic demand and lower the AUD before evidence on the world economy becomes clearer around the middle of the year
  • Accordingly we now expect the RBA to cut rates by 25bps in February and again in March prior to another period of stability


  • Our initial response to the September quarter national accounts was that the Reserve Bank would accept that the dismal growth profile was due to a lumpy fall in government spending; a temporary pause in the dwelling investment upswing; a sharper than expected drop in mining investment; and the fall in the terms of trade, which was already known to the policy makers.
  • However on reflection we think that the weakness in the accounts – including falling inflation; contracting national incomes; and a loss in growth momentum – coupled with further sharp falls in commodity prices, continued weakness in consumer sentiment – which has failed to recover from its post-Budget fall – and the prospect of a further significant negative shock to confidence will be enough to prompt the RBA to use some of their remaining policy ‘scope’ and lower rates further

On the AUD:

  • The low point in the AUD is likely to be around the June quarter
  • Westpac puts current AUD/USD fair value in the 79-81¢ range
  • We see the low point of the AUD as around USD 0.80 by June 2015
  • A strengthening world economy; rising commodity prices; RBA on hold with the next move up; and Australian interest rates still comfortably above US rates are likely to see AUD strengthen through the second half of 2015 and into 2016
  • As we have seen in previous episodes of Fed hikes the highly preemptive foreign exchange markets are likely to have moved largely before the first ‘well-signalled’ move
  • In those circumstances we expect the AUD will finish 2015 at around USD 0.85 and continue to benefit from strong world growth; rising commodity prices; and, rising AUD rates from the June quarter

Westpac joining in with Goldman’s and Deutsche:

And, this from TD makes the case for what needs to happen for the RBA to lower, or to lift rates:

So … like Goldman Sachs Asset Management head of fixed income in Asia-Pacific Philip Moffitt said yesterday … the next RBA meeting in February could be a “live” one

Beauty … The meeting is on Tuesday, February 3, 2015