RBA Under Pressure After IMF Report Cuts Forecast for Commodity Producers

Pressure is mounting on the Reserve Bank of Australia to cut interest rates in the wake of a gloomy report by the International Monetary Fund that forecasts falling growth for commodity exporters, including Australia.

The RBA board will meet next week to decide whether or not to cut the cash rate, now at 2 per cent, for the third time this calendar year.

While a rate cut on Tuesday would be unexpected, all meetings are “live” and economists say a move by the end of 2015 or in early 2016 is not out of the question. Several economists now believe there will be two rate cuts by the end of next year.

ANZ last week predicted there would be two more rate cuts to a record low of 1.5 per cent during 2016 because a lower dollar won’t be enough to lower the jobless rate.

The IMF’s latest World Economic Outlook warned that investment outside of mining was not picking up the slack left by persistent commodity price weakness.

According to its formula, growth rates in Australia could slip to 1.8 per cent over the next three years, from 2.8 per cent between 2012 and last year.

via AFR

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