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The Reserve Bank is unlikely to cut rates at the September board meeting, according to Shane Oliver, head of investment strategy and chief economist at AMP Capital.
“Given the proximity to the election and its signal that another interest rate cut is not imminent, rates are likely to be left on hold.” He said.
However, Mr Oliver said he does predict the Reserve Bank will cut rates further later in the year, unless the Australian dollar falls dramatically.
“The post meeting statement is likely to retain an easing bias, particularly with the capex outlook weakening further and inflation benign, which the RBA is likely to act upon at its October or November meetings unless the $A falls rapidly”.
Mr Oliver said he expected the AUD to devalue but not sufficiently enough to discourage a further rate cut.
“With commodity prices in a downtrend and the Australian economy deteriorating versus the US, it’s likely the $A will fall further. Given its overvaluation in terms of relative prices and costs, expect the $A to fall to $US0.80,” he said.
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