The odds of an interest rate cut in Australia in February have increased following the appointment of new directors to the Reserve Bank of Australia (RBA) Board, according to Goldman Sachs.
Writing in an economic research note, the investment bank’s economists said it viewed the appointments as supporting a relatively high degree of continuity in the RBA’s “reaction function” over the board transition period.
This was particularly the case given one of the new directors, Distinguished Professor of Economics at the Australian National University’s Centre for Applied Macroeconomic Analysis Renée Fry-McKibbin, had been working closely with RBA Governor Michelle Bullock over recent years as she conducted the RBA Review.
“In our view, this reduces the odds that the current Board defers the decision to cut rates until the new Board structure starts in March. We continue to expect the RBA to commence an easing cycle at February’s Board meeting, following a material dovish pivot by the RBA last week,” Goldman Sachs said.
In deciding to leave the cash rate unchanged at 4.35% at December's Board meeting, the RBA said the Board was gaining some confidence that inflation was "moving sustainably towards target”, leaving out previous language that the Board was “vigilant to upside risks to inflation” and "not ruling anything in or out”.
Treasurer Jim Chalmers earlier announced that former Bendigo Bank CEO Marnie Baker and Fry-McKibbin had been appointed to the RBA’s new monetary policy Board while former Telstra CEO David Thodey, former Business Council of Australia Chief Executive Jennifer Westacott, lawyer Danny Gilbert and banking executive Swati Dave were named as new members of the governance Board.
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