Just four out of the 19 economists surveyed by Bloomberg expect the RBA to cut rates again when it meets on June 5.
Analysts say the Reserve Bank might wait for fresh inflation data before making its next decision, but will also be keep a close watch on global events, particularly in Europe and in China, as mentioned by RBA governor Glenn Stevens yesterday.
If the RBA relies on the official ABS data, it will have to wait until August 7 to make its next interest rate decision, as June quarterly CPI data will only be released on July 25.
Westpac chief economist Bill Evans expects at least a 50-basis-point cut between now and August, but says Westpac is reserving its right to review its forecast on the RBA’s decision at its June 5 meeting “until next week, when more information will be available around the global situation”.
“We were also disappointed at the poor response of Consumer Sentiment in May and the continued deterioration in respondents’ already weak confidence about job prospects. That prompted us to subtly moderate our view from 50bps in June/August to ‘at least’ 50bps.
“With the RBA’s concerns around Europe and the assessment that policy is only mildly stimulatory the case for an immediate rate response is respectable. In fact a case to front-load the cut to offset any further confidence damage from Europe is also respectable,” says Evans.
The Reserve Bank might be swayed to move earlier by fresh data from other sectors, which will come out of over the next few days.
Tomorrow retail trade figures for April will be released giving an indication of consumer sentiment, while on Thursday building approvals data for April will give the RBA a sense of whether residential construction may pick up in the months ahead.
The RBA will also be able to reflect on a weaker housing market when the RP Data-Rismark May Home Value index is released on Friday.
RP Data national research director Tim Lawless says the housing market over May has remained “fairly soft, suggesting the recent interest rate cuts and strong labour force results are yet to have a positive influence on housing market conditions”.
“Over the month to date, the daily RP Data-Rismark Home Value Indices have fallen lower for each of the major capital cities apart from Adelaide,” he says.
Retail sales figures are forecast to rise by just 0.2% in April after an unexpected 0.9% increase in March.
The RBA will also take note of the disappoint result in the May Westpac Melbourne Institute Index with consumer sentiment rising just 0.8% despite the 0.5-percentage-point rate cut.
(article from www.propertyobserver.com.au)