Via Bill Evans fresh from his world tour on the weekend:
Markets are now broadly pricing in Westpac’s view on the outlook for the RBA cash rate with only around a 50% chance of a rate hike by the end of 2019. That is in stark contrast to a year ago when our call that rates would remain on hold in 2018 and 2019 was well out of market with markets anticipating around 75 basis points of tightening by the end of 2019.
A weakening housing market; soft inflation and wages growth; an uncertain consumer and pressures on funding have all conspired to cool markets’ expectations. That key dynamic around an uncertain consumer facing constraints on income growth with a falling savings rate always stood out as a key constraint on the ability of the household sector to lift spending in the way anticipated by the markets.
