(Bloomberg) — Australia’s central bank is poised to deliver its third interest-rate cut this year as inflationary pressures ebb, while Governor Michele Bullock is expected to stick with her cautious stance on the monetary policy outlook.
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Traders and most economists polled by Bloomberg anticipate the Reserve Bank will lower its cash rate by 25 basis points to 3.6% on Tuesday, bringing its cumulative easing in the current cycle to 75 basis points. The RBA will also publish its quarterly update of macroeconomic forecasts alongside the 2:30 p.m. decision. An hour later, Bullock will hold a media conference in Sydney.
The meeting comes five weeks after the central bank shocked investors by standing pat in defiance of overwhelming expectations for a cut. Data since then has shown the RBA’s preferred quarterly trimmed mean gauge of inflation cooled to 2.7%, edging closer to the midpoint of its 2-3% target, an outcome Deputy Governor Andrew Hauser described as “very welcome.”
The “appetite to shock the market again probably isn’t very high,” said Sean Kean, chief Asia Pacific strategist at JB Drax Honore, who expects a cut. As to the future, he says they’re unlikely to “commit to anything. It will be meeting by meeting and probably quarterly will be when they make the decisions.”
Australia’s economy hit a softer patch at the start of 2025 as both public demand and exports dragged on growth while consumer spending remained tepid. Timely data in recent weeks have suggested activity picked up last quarter, led by household consumption and trade.
Gross domestic product data for the second quarter will be released Sept. 3.
With inflation inside the RBA’s target band and growth picking up, investors are focused on how much further easing the economy will need. Bullock has said regularly that the RBA may not have to ease as much as global counterparts because it didn’t take rates as high during the 2022-23 tightening cycle.
Money markets are fully pricing one more cut after August, taking the cash rate to 3.35%, with a 50-50 chance of a further reduction by December. The median forecast among economists puts the terminal rate at 3.1% by early 2026.
Alicia Garcia Herrero, chief Asia Pacific economist at Natixis, expects a “hawkish cut” this week with unemployment still low.
