Westpac chief economist Bill Evans has predicted that the Reserve Bank of Australia will cut the cash rate by 25 basis points in August 2019 and then again in November.
The cash rate is the interest rate charged on overnight loans in the money market.
Or, put simply, it is the amount of interest a commercial bank must pay the Reserve Bank if it takes out an overnight loan.
In its latest Bulletin, Westpac has revised down its GDP growth forecasts for 2019 and 2020
from 2.6% to 2.2%.
The slower growth profile has meant the bank now expects to see the unemployment rate lift to 5.5% by late 2019.
According to Mr Evans, this makes a strong case for official rate cuts to cushion the downturn and, in turn, help meet the RBA’s medium term objectives.
"Our preferred estimate would be the August Board meeting. A full explanation of the reasons behind the decision can be set out in the August Statement on Monetary Policy.
That timing will also allow two more inflation prints to confirm that the further widening of the output gap, as growth remains stuck well below trend, is constraining inflation with little likelihood of achieving the current forecast of 2.25% inflation in 2020.
A second cut at the November Board meeting is likely to follow."
Bill Evans, Westpac Chief Economist
