Chief economist Saul Eslake predicts the Reserve Bank of Australia (RBA) will cut the cash rates again in May, after the central bank’s surprise move last month.
However, the Bank of America Merrill Lynch economist said the RBA can lift it back to 2.25% by the end of the year, thanks to a lower Australian dollar, reports Business Spectator. The rate can also go up to 2.5% by Q1 2016, he said.
Eslake’s comments come after the U.S. Federal Reserve hinted it will hold off the anticipated rate hikes.
Meanwhile, Credit Suisse Australia chief investment strategist David McDonald said “the move would push the US dollar lower and thereby lift the Aussie dollar, which would remove some much needed stimulus from the economy and make the RBA more likely to cut the cash rate to a record low of 2%”.
Some experts believe a further rate cut would help the Australian economy by making the country more attractive to tourists. This can also make exporters more competitive with international counterparts, which in turn could reduce the need for future rate cuts.