Australia’s central bank may cut interest rates on Tuesday on weaker housing market, CPI, analysts say

Australia’s central bank may cut interest rates on Tuesday after holding the rate flat for over two years.

For the first time since Philip Lowe’s appointment as governor in 2016, the Reserve Bank of Australia (RBA) is expected to lower its cash rate by a quarter point to a record low of 1.25 per cent, according to 14 of 26 economists surveyed by Bloomberg. The remaining 12 said they expected the RBA to leave the rate unchanged at 1.5 per cent.

After leaning towards a tighter policy only a few months ago, the RBA is now tilting marginally towards easing. The key trigger was a change in the policy stances of the US Federal Reserve and the Bank of Canada – two central banks the RBA watches more closely than others.

“We expect an interest rate cut this week and one more in August,” said Richard Yetsenga, chief economist at ANZ Bank.

“Activity across the region has improved over recent months, particularly in the PMIs and in China, but the improvement in activity has only been modest, and inflation remains quite low,” he said.

Behind the change in monetary policy bias are the developments in China, where growth has slowed and uncertainty over trade policy is hurting decision-making and investment.