Market turmoil won’t prompt action

The recent turmoil in financial markets will have brought a sudden end to Governor Stevens ’“chilled” Christmas period. But this won’t be enough to prompt the Reserve Bank of Australia (RBA) to cut interest rates at the policy meeting onTuesday 2nd February. However, we still believe that another year of below potential growth and weaker-than-expected underlying inflation will cause the Bank to cut rates twice more this year, from 2.0% now to 1.5%.