Quotes from BofA Merrill Lynch:
- It is uncontroversial to expect that the RBA will cut rates again in 1H15; the question remains when. We expect it will cut again at its March meeting next week but the uncertainty is high. This is because although we accept that the short-term economic outlook warrants further easing, the RBA has provided no communicated forward guidance. And while a more dovish stance seems implied by its downgraded growth outlook, it does not seem to be holding a strong easing bias at all.
- This uncertainty is also reflected in the forecasts of the community of market economists, which remain divided. Around half anticipate the RBA to go again next week, with the remainder expecting the next move by the end of the June quarter at the latest. Indeed some, a minority, are forecasting more than one cut over this timeframe. Market pricing broadly reflects a similar expectation with around a 50% chance of a 25bp cut priced at the March meeting moving to being fully priced in by May.
- Consequently, it will not only be the RBA's action and any alteration of its language that will be watched from the March meeting to shape expectations: although if recent history is any guide the RBA may be reluctant to provide any more insight in this space suggesting that it itself is assessing the outlook based on short-term developments.
