Old guard hold their rate cut nerve

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From the SMH:

Westpac was not the only bank factoring in more rate cuts. National Australia Bank and Bank of America-Merrill Lynch are both among those that think the RBA has more to do and NAB chief economist Alan Oster was standing by his call on Monday.

Bank of America-Merrill Lynch chief economist Saul Eslake also maintained his conviction. ”Our view has been there would be one more cut, some time in the second half of the year. We haven’t changed that view as yet,” he said. ”We remain of the view, notwithstanding some recent data which challenges it, that growth will remain below trend and unemployment will continue to rise for longer than the RBA now does; and we aren’t as pessimistic as the RBA seems to be about the near-term inflation outlook.”

Mr Eslake conceded he was influenced by indications from the RBA about the effectiveness of another rates cut, but not enough to modify his view.

”We find it hard to believe that the RBA would do nothing in the face of unemployment continuing to rise, as we think it will, throughout this year and possibly into 2015 as well.”

Mac Bank’s Brain Redican chopped back one of his future cuts today but still sees one more in September. Goldman Sach’s Tim Toohey also sees more cuts.

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Although I’m younger and have a nicer smile, I agree the next move remains down, despite the apostasy of Bill Evans!

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.