Westpac sees third rate cut in Australia this year

Credit: REUTERS/© Daniel Munoz / Reuters

SYDNEY, May 24 (Reuters) - The chief economist of Westpac Banking Corporation WBC.AX, Australia's largest bank by assets, on Friday said he expects three central bank rate cuts this year, in a call that knocked 0.3 percent off the local dollar.

The Reserve Bank of Australia (RBA) said on Tuesday that it will consider cutting interest rates at its meeting next month as growth and inflation waver, its clearest indication yet that it intends to ease policy.

That prompted Westpac chief economist Bill Evans on Tuesday to bring forward his forecasts for two cuts to June and August from previous prediction of August and November.

Evans said on Friday he believes a third cut could proceed in November as well.

"Westpac is now forecasting three cuts in 2019 in June; August and November to push the cash rate from 1.5% to 0.75% and to hold at that level through 2020," he said in a note published on the bank's website.

"Our forecasts for employment, wages growth, economic growth, inflation and conditions in the housing market are consistent with the need for policy to ease through the full course of 2019," he said.

The Australian dollar AUD= fell from around $0.6904 to $0.6884 after Evans' forecast. Westpac was the first of the four major banks to predict a cut back in February, when the other three were either forecasting steady policy or a hike by 2020.

A cut would be the first for RBA Governor Philip Lowe, who has held policy at an all-time low 1.50 percent since taking the central bank's helm in September 2016.

(Reporting by Tom Westbrook; Editing by Sam Holmes)

((tom.westbrook@thomsonreuters.com; +61466355340; Reuters Messaging: tom.westbrook.thomsonreuters.com@reuters.net; twitter.com/tswestbrook))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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