BENGALURU, Sept 20 (Askume) – Australia’s central bank will keep its key policy rate unchanged on Tuesday and for the rest of the year amid rising price pressures, economists polled by Askume said, with most expecting the first rate cut early next year.
Inflation slowed to 3.5% in July but remains above the Reserve Bank of Australia’s 2%-3% target range. With the strong job market, policymakers have little room to cut interest rates next week.
The RBA will lag well behind other major central banks that have already begun cutting interest rates, including the Bank of New Zealand , the Bank of England , the Bank of Canada and the Federal Reserve , which cut rates by 50 basis points on Wednesday.
All 45 economists surveyed from Sept. 12 to 19 expected the Reserve Bank of Australia to keep the official cash rate (AUCBIR=ECI) unchanged at 4.35% at the end of its two-day meeting on Tuesday.
An overwhelming majority of 40 out of 44 expect rates to remain unchanged until the end of the year, while interest rate futures are priced at a slightly better than 50% chance of a rate cut by then.
“It is unlikely that the Reserve Bank of Australia will ease monetary policy at this meeting,” said Robert Carnell, ING’s head of Asia-Pacific research.
He said, “The risk is slightly to the upside: the RBA never really tightened interest rates enough to slow the economy down to control inflation, which I think is an unanswered question.”
Among the major local banks, ANZ, NAB and Westpac expect rates to remain unchanged this year, while the Commonwealth Bank expects a rate cut before the end of the year.
Major domestic banks were contacted after Wednesday’s Fed rate decision, but they did not change their views.
“We do not think the Fed’s decision to ease by 50 basis points will have a direct impact on the Reserve Bank of Australia’s decision,” said Catherine Birch, senior economist at ANZ Bank.
“We expect the (Australian Reserve Bank) to retain much of the accommodative language at its August meeting.”
The Reserve Bank of Australia is expected to begin an easing cycle next year, cutting interest rates by 25 basis points in the first, second and third quarters, and then pause to reduce the cash rate to 3.60% in the last quarter of 2025.
(Additional reporting from Askume Global Economic Poll)
