HSBC Joins The RBA Rate Cut Club

HSBC, renowned as being one of the most hawkish interest rate forecasters in Australia, is now predicting that the RBA will cut rates.

It sees the RBA delivering a 25 basis point cut in June, and another in August. There may be even more depending on what happens with the trade war between the US and China.

The RBA’s next monetary policy decision will be delivered on June 4.

HSBC, one of the last remaining forecasters who thought the next move in Australia’s cash rate would be higher, is now predicting the RBA will cut official interest rates.

“Despite considerable reluctance to cut the cash rate, and a strong preference for a fiscal policy response, we now expect that the RBA will be forced to cut,” HSBC’s Chief Australia and New Zealand Economist Paul Bloxham wrote in a note on Thursday.

“With little reason to wait, we now expect the RBA to cut its cash rate in June by 25 basis points to 1.25%, and to cut again in August to 1.00%.”

Beyond the two rate cuts he’s already forecasting, Bloxham said there be even more to come, noting “any further policy action could be highly affected by the way in which the [China and US] trade tensions evolve”.

Financial markets put the probability of a 25 basis point rate cut from the RBA in June at around 60%. By early next year, a full 50 basis points of cuts is priced in, a scenario that would leave Australia’s cash rate at 1%.

This is on the back of NAB also bringing forward its Rate Cut predictions.

The National Australia Bank (NAB) expects the Reserve Bank of Australia (RBA) will go hard and early when it comes to interest rate cuts, forecasting the bank will cut Australia’s cash rate by 25 basis points in both June and August.

The NAB previously forecast the RBA would move in July and November.

Great news obviously for home owners and investors alike!

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