Unemployment will affect rates, says Institute

The recent edition of the Melbourne Institute Monthly Bulletin of Economic Trends has forecast a rate cut in April following a rise in unemployment. The report sees unemployment rising from 5.2 percent to 5.5 percent in June, with the mining states to be hardest hit due to dampened demand for resources.

“The significant deterioration observed in February‘s unemployment data and the decline in the December quarter GDP, will probably generate another rate cut in April,” said Dr Michael Chua, a Melbourne Institute research fellow.

The Reserve Bank will cut 50 basis points (half a percent), the institute believes. The RBA maintained the cash rate at 3.25 percent this month, increasing the probability of a cut in April.

According to international financial services group Credit Suisse, the institute’s prediction echoes the actions of traders who have priced for an April cut of 50 basis points.

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