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29 Mar 2014
RBA; downside risks, not upside– BAML
FXStreet (Guatemala) - Analysts at Bank of America Merrill Lynch explained that they still look for downside risks to rates not upside.
Key Quotes:
“It remains our view that the RBA will potentially need to reduce rates further in the second half of this year. The basis for our forecast encompasses the still many challenges the economy must face over this and coming years”.
“Despite recent encouraging data flow in some sectors, we believe it is premature to forecast rate rises this year. This is because we have seen very little of the decline in the mining investment cycle that is imminent. Further, there are few convincing signs of recovery in the non-mining economy outside of the housing sector”.
“Indeed, we suspect that if rates were to be raised in the second half, a resulting higher dollar would weigh on the recovery in non-mining sectors; the housing recovery would not deliver fully in terms of potential growth; and renewed pressure would be exerted on household budgets”.
Key Quotes:
“It remains our view that the RBA will potentially need to reduce rates further in the second half of this year. The basis for our forecast encompasses the still many challenges the economy must face over this and coming years”.
“Despite recent encouraging data flow in some sectors, we believe it is premature to forecast rate rises this year. This is because we have seen very little of the decline in the mining investment cycle that is imminent. Further, there are few convincing signs of recovery in the non-mining economy outside of the housing sector”.
“Indeed, we suspect that if rates were to be raised in the second half, a resulting higher dollar would weigh on the recovery in non-mining sectors; the housing recovery would not deliver fully in terms of potential growth; and renewed pressure would be exerted on household budgets”.