The Reserve Bank of Australia is likely to cut its policy interest rate at next month's meeting, after holding it at today's meeting, to provide additional stimulus to the flagging economy, Capital Economics Asia Economist Daniel Martin said Tuesday.
The firm noted that the Australian economy, which is currently running below trend, is likely to have slowed further in the first quarter as the positive contribution from strong private consumption was offset by a decline in investment.
The central bank today kept its cash rate unchanged as expected after cutting it a record low of 2.75 percent last month, citing below-trend growth and depreciation of the Australian dollar.
The bank has said that growth is likely to remain slightly below trend in the near term, and that the inflation environment leaves scope for further rate-cuts if needed.
The central bank noted that it is too early to say that earlier interest rate cuts have spurred borrowing as much as expected. This has been evidenced by recent data showing slowdown in credit growth and stagnation of house prices.
However, the depreciation of the dollar has helped the manufacturing sector, giving the economy some relief. The latest manufacturing purchasing managers' survey revealed that the Australian factory sector rebounded from a record low in May.
For comments and feedback: editorial@rttnews.com