Brexit may see RBA deal cut

Adam Smith 29 June 2016

reserve bank of australia signThe EU referendum may force the RBA’s hand when it meets in August.

Analysts are predicting that the Reserve Bank will keep rates on hold when it meets next Tuesday, but that the RBA will issue another rate cut at its August meeting after it has more fully assessed the fallout from Brexit, the Australian Financial Review has reported.

While a cut is widely expected in August, analysts have indicated July may be too soon to expect a cash rate reduction, with official second quarter inflation figures due on July 27. However, the AFR forecast that next week’s meeting could see the Reserve Bank board reinstate an official easing bias in light of the United Kingdom’s vote to leave the European Union.

"Any glimmers of the end of this global easing cycle have quickly been extinguished with Brexit," Royal Bank of Canada senior economist Su-Lin Ong told the AFR.

"Central banks are set to continue to provide more rather than less accommodation and the RBA remains part of this global narrative."

Morgan Stanley economist Daniel Blake agreed, and told the AFR that the reinstatement of an official easing bias is likely to be included in the Bank’s post-meeting statement next week. But Deutsche Bank macro strategist David Plank told the AFR he did not believe the RBA would tip its hand at its July meeting.

"Next week's RBA meeting may disappoint market sentiment. We don't think the RBA will ease in July and we also think it is unlikely to express much, if any, in the way of forward guidance ahead of its forecast update for the August statement of monetary policy."

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2 Responses

  1. Default Gravatar
    RohJune 29, 2016

    How would it effect the property prices?

    • Staff
      JodieJune 30, 2016Staff

      Hi Roh,

      Thanks for reaching out.

      As with a lot of topics that affect the global financial markets different experts have different views on how the vote might affect the Australian market, we rounded up some views in this news story about the possible effects on the Australian property market. It’s all about waiting to see what long term effect the decision will have on the UK and European economies as this will then have a flow on affect on the Australian economy and Australian banks as they source capital from overseas markets.

      Regards
      Jodie

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