Reserve Bank expected to deliver another interest rate cut today

ABC NEWS (Australia)

The Reserve Bank is almost certain to cut interest rates again this afternoon. Economist Besa Deda says it's likely to be one of several rate cuts this year.

Transcript

00:00We're looking for a quarter of a percent today, that's a widely expected decision.

00:07Beyond that, that's the big question, how deep do they really cut?

00:11And there's some argument that I think has quite a bit of validity that they may still

00:18continue to be quite cautious about their approach.

00:22So we think there will be three more rate cuts over the next 12 months, but there's

00:27a lot of variability around that.

00:30And that's got a lot to do with what's happening in the global economy.

00:34There is a lot of fluidity around tariffs and what might happen there.

00:40There is still uncertainty, there's unpredictability.

00:44And so I think they may leave that a little bit open and they may not signal or provide

00:51a significant signal around where the cash rate might go in the near future.

00:57But by and large, the market will be anticipating more rate cuts.

01:01If we look at current interest rate pricing, markets are looking for two more rate cuts

01:06before the end of the year, one in August and one in December.

01:11And if we think about what are the factors they're really looking at?

01:14Well, they're looking at underlying inflation.

01:17That's fallen back into the Reserve Bank's target ban.

01:21So that does suggest that they, you know, favours further easing.

01:25If we look at consumer spending growth, that is quite sluggish.

01:29The latest reading showed that consumer spending volumes were flat in the March quarter and in

01:34per capita terms went backwards.

01:36Consumer confidence is still weak.

01:38The global economy has significant downside risks attached to it.

01:44But then on the flip side, the fiscal situation in Australia suggests that that is supporting

01:51spending and economic activity.

01:54And then also, if you look at the labour market, the latest jobs numbers were incredibly strong.

01:59Almost 90,000 in the month and the unemployment rate stayed steady at 4.1 per cent.

02:05But that's also running alongside soft productivity growth.

02:09And so what that means is the Reserve Bank might be a bit cautious around what that might mean

02:14for inflation and pressures going forward in terms of unit labour costs.

02:18And so, by and large, I do favour more rate cuts from the RBA, but I think they may still

02:24remain cautious, at least until they work out what's happening with the global economy.

Category

Transcript

Recommended