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Australia Set to Cut Interest Rates on May 20

Economists widely predict a 25-basis-point reduction as inflation reaches target and labor market remains stable.

A man smokes next to the Reserve Bank of Australia headquarters in central Sydney, Australia February 6, 2018. REUTERS/Daniel Munoz/File Photo
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Overview

  • The Reserve Bank of Australia (RBA) is expected to lower its cash rate from 4.10% to 3.85% during its May 20 policy meeting, according to a Reuters poll of economists.
  • Core inflation cooled to 2.9% in the March quarter, falling within the RBA's target range of 2–3%, providing justification for a rate cut.
  • The unemployment rate remains steady at 4.1%, aligning with forecasts and reinforcing the case for monetary easing.
  • Economists anticipate two additional 25-basis-point cuts later in the year, potentially bringing the cash rate to 3.35% by December.
  • Global trade uncertainties, including a recent US-China trade truce, and subdued domestic growth are cited as additional factors supporting the need for rate cuts.