The flow of positive economic news since the last Reserve Bank of Australia (RBA) meeting makes it a sure bet that the RBA will leave rates on hold at 2.0% for the seventh consecutive month when the Board meets on Tuesday 1st December. The likelihood of rate cuts further ahead has undoubtedly also fallen since the last meeting. However, we still believe that GDP growth in 2016 will come in below the RBA’s forecast and that low underlying inflation is likely to become a problem. As such, the RBA will have no choice but to cut interest rates again next year.
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