Experts divided on May rate cut

Experts divided on May rate cut

Economic experts are divided on whether the Reserve Bank of Australia will lower the cash rate on 2 May, says comparison website

According to a Reserve Bank survey by Finder, 16 experts – including those from Commonwealth Bank and Westpac – expect the cash rate to be cut.

However, 18 of the 34 economists surveyed expect the cash rate to hold on Tuesday.

For those who expect a cut on Tuesday, moderate economic growth, a high Australian dollar, and poor consumer confidence are sighted as foremost reasons to provide more stimulus, a statement issued by Finder said.

AMP head of investment strategy and chief economist Shane Oliver said: “Growth is sub-par, the business investment outlook is weak, the Australian dollar is still too high and inflation is benign.

“But it’s a very close call … My view of a rate cut in May is a close call. If no move in May then expect another cut in the months ahead.”

“The economy is in need of some further policy stimulus as key commodity prices fall and non-mining capex fails to lift,” Commonwealth Bank chief economist Michael Blythe said.

Of those who expect the rate to hold, many indicate improved employment figures and the need to wait until the release of the federal Budget before another cut is made, the statement said.

NAB chief economist, Alan Oster, said that data has improved slightly, so the RBA has “time to watch” for a few months.

Heritage Bank chief strategist and investment officer, Paul Williams, said the RBA will be cautious as they have limited monetary policy "ammunition" left.

The majority of experts are forecasting at least one cut by the end of the year, with most predicting it will occur between July and September.

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