Westpac's Evans revises his rate cut predictions

Rising house prices were the elephant in the room when the RBA met.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Suspicion is growing that the Reserve Bank of Australia (RBA) may be more concerned by a pending property price bubble than it is letting on, causing two senior economists to revise their predictions regarding further rate cuts.

Bill Evans from Westpac (ASX: WBC) recently predicted that a 25 basis point rate cut would occur by Melbourne Cup Day next month, based on the rising unemployment rate, poor growth in non-mining sectors and a strong Australian dollar.

However, earlier this week when the central bank met, it was noted that the rise in house prices was not mentioned when the decision was made to leave interest rates at 2.5%. Richard Coppleson from Goldman Sachs said, "It tells me that it must be the elephant in the room and that by ignoring it… they have just highlighted how concerned they must secretly be."

Whilst Evens still believes that the official cash rate will be cut to as low as 2%, he now anticipates that the cuts will occur in February and May, whereby the RBA can assess a boost in post-election confidence and a pick-up in house prices. Alan Oster from NAB (ASX: NAB) holds a similar view, suggesting that a cut would be put back to February.

Foolish takeaway

The resilience of the Australian dollar is one of the more pressing issues which could cause the RBA to act on cutting interest rates sooner rather than later. Companies that are heavily exposed to overseas markets, such as QBE Insurance (ASX: QBE) or Cochlear (ASX: COH), would greatly benefit from relief from the strong dollar.

Are you interested in our #1 dividend-paying stock? Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

More reading


Motley Fool contributor Ryan Newman owns shares in Cochlear.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »