Speaking on his YouTube channel, independent economist Stephen Koukoulas argued it was “critical” for the central bank to invoke section 25 of the RBA Act, which permits the governor to convene a special meeting “at any time”.
Continuing the rhetoric on his LinkedIn profile, Koukoulas said: “Six weeks until the next scheduled RBA meeting is a long time away when the wheels are falling off.
“In delivering a rate cut, the associated RBA commentary and press conference from the governor could flesh out many of the issues and risks it is seeing and would no doubt sooth at least some of the concerns from business and consumers alike.”
Monetary policy is fundamentally about being proactive, he argued, citing what he described as “serious errors” by the RBA over the past decade – instances where the central bank “misread the economy and downplayed, or even ignored, clear signals from the markets”.
Koukoulas’ argument hinges on the expectation that Australia will be “smashed in the backwash” of the ongoing trade war.
“Roughly 25 per cent of our economy is based on international trade,” he said. “Particularly with China having a very punitive tariff imposed by Trump, that has an impact on our markets. We’re already seeing the broad commodity indices falling very sharply, so is our Aussie dollar.”
Speaking to InvestorDaily, GSFM’s Stephen Miller disagreed with Koukoulas, stating that an unscheduled meeting would “smack a bit of panic” and undermine confidence.
“What we’re facing here is elevated uncertainty and uncertainty is the key here. So I think you still want to have a proper augmentation of one’s information set before making a decision on what to do with rates,” Miller said.
“I happen to think that inflation is probably doing a little better than the RBA projection, and I happen to think that what we’re seeing in terms of the disruption to international trade will mean that we do get accelerated rate cuts, but I’m not sure there is the imperative to do so out of cycle.”
Miller believes the RBA is better positioned to wait for the next CPI data at the end of this month before making any decisions, allowing the tariff situation to unfold further.
“If it decides it needs to do 50 basis points at that meeting it can do 50,” he said, adding that current circumstances don’t require panic.
“It could be more unnerving for markets and sentiment than helpful by having an out-of-cycle rate cut.”
Amid that turbulence on the international stage, traders have ramped up bets that the RBA will cut four times this year, with the likelihood of a full 50 bp cut in May now exceeding 50 per cent.
Markets are pricing in a cash rate of 3.1 per cent by year’s end – front-loading what was once expected to be a more gradual easing cycle.
Some economists also expect a 50 basis point rate cut in May, with Deutsche Bank’s chief economist Phil O’Donaghoe noting on Tuesday: “Short of an off-ramp on US trade policy, we expect the RBA to cut 50 bps in May.”
“This is one of the few occasions in history where a global ‘shock’ outweighs prevailing domestic economic considerations,” he added.
For now, Koukoulas appears to be the only economist calling for an out-of-cycle meeting.
