After a series of recent economic data fell below expectations, the market is almost certain that the RBA will cut interest rates in July.
Former central bank chief economist Luci Ellis questioned whether the central bank has been delaying its policy easing for too long. According to the Australian Financial Review, based on Westpac data, the financial market currently believes that RBA President Michele Bullock has a 97% chance of announcing the third rate cut this year at the board meeting from July 7 to 8, reducing the cash rate from 3.85% to 3.6%.
(Image source: AFR)
Financial markets predict that the central bank will lower the cash rate to 3.1% by the end of the year. Westpac chief economist Ellis pointed out that weak national accounts have raised questions about whether central banks are slow to move and whether interest rates are too high.
She said: "Australia's endogenous growth remains weak and is sensitive to disruptions to the 'care economy' expansion. With inflation within the 2% to 3% target range, why not cut interest rates further and more rapidly?"
JPMorgan advanced its rate cut forecast from August to July to cope with inflation risks and trade disruptions.
EQ Economics Managing Director Warren Hogan recommends lowering the cash rate by 0.35 percentage points to 3.5% next month to encourage consumption.
Common Bank economist Lucinda Jerogin expects interest rate cuts in August and September, but believes that the July meeting remains a possible decision time.
"Customer spending in the June quarter was flat after weak retail,” she noted.
