By Veronica Dudei Maia Khongwir
BENGALURU (Reuters) -The Reserve Bank of Australia will cut its cash rate by 25 basis points to 3.60% on August 12, according to economists polled by Reuters, who have not changed their rate views.
Inflation fell to 2.1% last quarter, a near-four year low and close to the lower band of the RBA’s target range of 2%-3%, giving the RBA what it needs to continue cutting rates after a rare split decision to pause last month that surprised markets.
The unemployment rate rose to a 3-1/2-year high of 4.3% in June. Together with slow domestic demand, this suggests a need for less restrictive monetary policy in an economy where household spending accounts for over 50% of growth.
All 40 respondents in the August 4-7 Reuters poll expected the central bank to cut its official cash rate by 25 basis points to 3.60% on August 12.
“Q2 inflation data was no worse than feared and the softer June labour force report we saw recently is more than enough to get your 25 basis point rate cut. It would seem the RBA’s recent concerns about inflation were perhaps a little bit overdone,” said Andrew Ticehurst, senior economist at Nomura.
Over 90% of respondents who had views on rates until year-end, 35 of 38, predicted another 25 basis point cut next quarter, bringing the cash rate to 3.35% by end-December. Two said 3.10% and one predicted rates would be 3.60%.
All of Australia’s major banks – ANZ, CBA, NAB and Westpac – expected rates to be 3.35% at the end of this year.
Median forecasts showed one additional rate cut by end-March to 3.10%, with rates then expected to remain steady through 2026.
(Other stories from the August Reuters global economic poll)
(Reporting by Veronica Khongwir. Polling by Susobhan Sarkar. Editing by Ross Finley and Mark Potter)
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