An important revelation from the ALP-aligned economist, Stephen Koukoulas, who posted the following comments on his blog on the 28th of February (I just stumbled across them today):
"Whether the RBA cuts in March is not at all clear. There is no doubt it could (should) cut interest rate without fuelling a lift in inflation. This judgment is shared by many Board members, but whether the news between the February RBA Board meeting and now is sufficiently soft for that judgment to spread to the doubting Thomas' on the Board will be revealed on 6 March."
Koukoulas suggests current RBA board members think rates should be cut, but that there are "doubting Thomas' on the Board" preventing this from happening. It would be interesting to know where he got this information from...
After the RBA's February decision to hold, which I predicted before the event (I also anticipated the November cut a week before the meeting, but was 50:50 on December, which subsequent RBA comms have shown to be a line-ball call), Koukoulas wrote:
"The RBA has shocked the world by holding official interest rates steady at 4.25%. It is a surprise because the economy is growing a little below trend, inflation is low and falling, the labour market is softening and global conditions are problematic."
Regular readers will recall that late last year Koukoulas forecast a 3.5 per cent RBA cash rate by June 2012.
Since the February board meeting the unemployment rate has fallen to 5.1 per cent while financial markets have significantly scaled back the prospect of any future cuts. GDP this week will be interesting, to say the least.
Koukie has very strong ALP and government contacts, so it is useful seeing what he has to say. Readers will recall that the disconnect between doves and hawks on the RBA board that he notes above is something I argued existed way back in the first half of 2011.
- Posted using a mobile device
