RBA May Cut Rates to 3.85% as Job Growth Picks Up and Inflation Cools

RBA May Cut Rates to 3.85% as Job Growth Picks Up and Inflation Cools

The Reserve Bank of Australia (RBA) may soon lower its official cash rate to 3.85%, signaling a shift in its monetary policy stance as both inflation pressures ease and employment growth accelerates. According to RBC Capital’s chief economist, Su-Lin Ong, the RBA has been facing a narrow policy road in recent years, trying to balance its twin mandates of full employment and stable inflation.

“Maybe the policy road is now at long last beginning to open a little bit as employment growth is accelerating and inflation is being brought under control,” Ong remarked. Since the last RBA board meeting, recent data has shown a moderation in inflationary pressures and stronger-than-expected employment figures, suggesting that the central bank could afford to ease its tightening cycle.

In light of these developments, Ong believes the RBA is likely to cut rates by 25 basis points to 3.85% during its upcoming meeting on Tuesday. This potential reduction reflects a more flexible stance from the central bank, which has previously maintained a firm approach to address inflation.

As the Australian economy navigates this complex terrain, the RBA’s upcoming decision will likely be closely watched by both markets and economists as an indication of how policymakers plan to adjust to evolving economic conditions.