RBA to cut by year end? - Westpac

Analysts at Westpac explained that the RBA held the cash rate at 1.5% in February and maintained a neutral outlook in its statement. 

Key Quotes:

"This was fully expected. Perhaps most notable in the statement – later reinforced in the quarterly SoMP – was a more upbeat view of the global economy: “The improvement in the global economy has contributed to higher commodity prices, which are providing a boost to Australia's national income.” GDP growth is expected to rebound after the weak Q3 reading. 

Westpac expects that the labour market – rather than inflation - will be key to whether there is a rate cut in 2017. Our base case is that the cash rate remains at 1.5% throughout both 2017 and 2018. We see risks to this view skewed more to a rate cut than to a hike, as growth in 2018 could disappoint. 

Markets price only a small risk (about 10%) of a cut by June 2017 and then toy with the idea of a rate rise by year end (15% chance)."