MNI INSIGHT: Chances Rise RBA Will Cut Rates On Tuesday

By Lachlan Colquhoun

     SYDNEY (MNI) - Chances are rising of a Reserve Bank of Australia rate cut

at tomorrow's Board meeting in response to the coronavirus crisis, MNI

understands.

     The RBA has downgraded growth forecasts for the first quarter, MNI

understands, and is in communication with other leading central banks to discuss

the potential for coordinated action.

     It has said it stands ready to ease again if required, although with rates

at a record low 0.75% and the bank hesitant to use extraordinary measures, it is

running out of ammunition.

     Up until days ago a March rate cut seemed unlikely, as the RBA was expected

to save the few bullets it has left in case the virus impacts worsen and extend

until later in the year.

     The initial assessment inside Martin Place was for an outbreak of a shorter

duration than has transpired and an impact like that of the 2002 SARS outbreak,

but the virus is now expected to have a deeper effect on trade and supply

chains.

     The RBA has hoped the recent house price recovery -- driven by lower rates

and regulatory easing -- to kickstart sales of household goods as people move

house or prepare properties for sale. However, many goods in this sector,

including furniture and white goods, are sourced from factories in China.

     GDP data for the last quarter of 2019 will be released by the Australian

Bureau of Statistics on Mar. 4, the day after the RBA meeting.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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