The bank was expecting a rate hike by November this year but now expects any such rate hike will come midway through next year.
“There is no escaping that a rate cutting scenario – a low probability last year – has recently become a material near term risk,” he said.
This follows a change by the RBA to a more neutral position on interest rates signalled last week by governor Philip Lowe who had previously said that “the next-move-is-up scenarios were more likely than the next-move-is-down scenarios”.
Several banks have now changed their views including most recently the NAB, which expects interest rates will remain on hold until 2020, following a soft business conditions survey.
The Commonwealth Bank expects a change in the middle of next year, ANZ expected two rate rises in 2020 and Westpac expected no changes this year or next.
Goldman Sachs said the worst case downside scenario involved the RBA cutting the cash rate as soon as the second quarter of 2019, if fourth quarter national accounts show consumer spending to be as weak as recent data on retail sales.
This coupled with house prices continuing to fall by about 1 per cent per month, and a weaker outlook for domestic demand consistent with the unemployment rate rising by 10 basis points per quarter.
More to come.