In ANZ’s Australian Economic Update, the bank said it now expects the first interest rate hike to be in November 2015 instead of its originally forecasted date of May 2015.
“With lower growth and little inflationary pressure, the RBA has scope to keep monetary policy accommodative for longer. Accordingly, we have revised our cash rate forecasts," a statement from ANZ said.
“We still expect a new tightening phase to commence next year, but have pushed back the timing of the first rate hike from May to November,” ANZ said.
ANZ also pointed out the timing of the US starting its monetary policy normalisation will be important “given the potential” effects it could have on the exchange rate until November 2015.
“Following that, we expect only a very gradual tightening cycle with the cash rate peaking at 3.5 per cent in mid-2016,” ANZ said.
“Our view is predicated on a sustained recovery in the US economy, with the Fed beginning to raise rates in March 2015. Moreover, we continue to expect solid, but slowing growth in China,” it said.
The bank indicated that a “hard landing” in China’s slowing growth would “clearly impact its outlook”.
“The key channel through which this would be felt is through further falls in the terms of trade. This would weigh further on incomes and demand and dampen the recovery,” ANZ said.
