"Close call" but Tuesday may be too early for the RBA to cut interest rates, analysts say

"Growth prospects, in particular, have deteriorated since November, which the RBA will probably still give a nod in February, we have seen some signs of lower consumer spending, more pronounced declines in building approvals and housing markets, and a deterioration in global economic conditions and declining markets.

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"There is not much that has moved in the opposite direction, although the unemployment rate remains low, the mining sector is recovering, as well as non-mining investment spending -, while defense and infrastructure should be strong, it is likely that the RBA will downgrade its growth forecasts for 2019 and 2020. "

For its part, TD Securities said that a rate cut this week "is a match" and that the board could opt for the expression of an explicit "easing bias" and pave the way for a reduction in the month of August ".

TD sees the bank revise down GDP growth by 2019 by 0.5 percentage point and CPI baseline forecast by 0.3 percentage point in Friday's SoMP , thus justifying a reduction of support for growth.

ANZ is betting on a rate cut this week and the futures market now plans a 37% chance of a 0.25 percentage point cut on Tuesday.

In a preview of this week's RBA and RBNZ meetings, Bank of America Merrill Lynch said it expects the RBA to maintain its rates, although weak inflation suggests a possibility of reduction.

"The RBA could easily justify a reduction after surprisingly low inflation data in the first quarter," said BofAML. "However, we believe that it is more likely to wait for policy directions to evolve gradually and that an evaluation period is underway to badess growth and demand for labor." # 39; s work.

"The missing base inflation was not so far from the forecasts." We also badume that the bank would prefer, if possible, not to politicize monetary policy the week before the May 18 federal election. is destined to become more expansionist, regardless of the winner. "

However, BofAML expects the RBNZ to cut rates to 1.5% this week.

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"We believe that a rate cut in NZ is more likely as the RBNZ has moved to an explicit easing bias in March.

The central bank said that "given the weak global economic outlook and slowing domestic spending, the more likely direction of our next optical character recognition move is downward".

BofAML believes that "there is a stronger argument for a move" [this] this week, given the almost recessive level of business confidence that threatens hiring and investment, as well as the preference for more difficult financial conditions. "

Dale Gillam, of Wealth Within, also does not see the need for the RBA to rush.

"It is very likely that we can see a reduction in the interest rate" this week, said Mr Gillam. "Before our last federal election, the RBA cut rates based on global growth figures and lower inflation levels.

"It is interesting to note that this situation is quite similar to the situation we are currently facing, with inflation below expectations and strong performance in global markets.

"That said, with a fragile property market and a good deal of political uncertainty, I think it would be wise for the RBA to maintain interest rates now."