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Investing.com-- The Reserve Bank of Australia is likely to cut interest rates in May, with its recent meeting minutes supporting this view, ANZ analysts said in a note on Tuesday.
ANZ expects the RBA to cut its benchmark cash rate by 25 basis points in May, July, and August, in order to offset some challenges arising from global trade and growth headwinds.
The minutes of the RBA’s late-March meeting showed policymakers concerned over a global trade conflict and its impact on Australia, especially on domestic inflation.
“This leaves the door open, in our view, for easing ahead of hard data showing impacts of global trade uncertainty,” ANZ analysts said.
The RBA signaled in its minutes that while it was uncertain over the near-term outlook, it expects to have more clarity to make a rate decision in May. The central bank had kept interest rates steady in its late-March meeting, after cutting them by 25 basis points to 4.1% in February.
But the central bank said it had still not changed its view on the Australian economy recovering in the coming quarters, with the labor market expected to remain robust despite an unexpected drop in February. ANZ also considers February’s labor drop to be “more noise than signal.”
The RBA kicked off an easing cycle in February amid clear signs of progress towards bringing down inflation, although core inflation was yet to sustainably fall within the bank’s 2% to 3% range.
Cooling Australian economic growth also furthered the case for more easing, although the RBA is still expected to remain cautious over more easing amid persistent upside risks for inflation.