UBS Brings Forward RBA Rate Cut to February, Citing Fed's Downward Pressure

UBS has moved forward its prediction for the Reserve Bank of Australia's (RBA) first rate cut from May 2024 to February 2024. The bank believes that the downward pressure from the Federal Reserve's anticipated rate cuts over the next year will give the RBA more room to ease.

George Tharenou, UBS's Chief Economist, said Australian interest rates are likely to remain higher for longer, at least compared to global trends, which are increasingly dovish. UBS now expects a lower terminal rate for the US and a rapid decline in the Fed funds rate to levels significantly below the RBA's official cash rate. He said these factors suggest the RBA could begin easing monetary policy sooner than previously expected.