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Investing.com-- The Reserve Bank of Australia (RBA) is expected to cut interest rates by 25 basis points at its next policy meeting on May 20, according to Westpac economists, who said the risks around inflation and global growth have shifted decisively to the downside.
Australia’s central bank is now likely to lower its cash rate to 3.85%, citing softer domestic labour market indicators, weaker-than-expected wage growth, and growing global economic uncertainty, Westpac’s Chief Economist Luci Ellis said in a note.
The decision is forecast to proceed even if first-quarter inflation data is slightly above expectations, Ellis said, as the RBA grapples with the fallout from escalating U.S. tariff tensions and slowing global demand.
"Even though we do not expect the US administration to implement tariffs at the rates originally announced, some damage has already been done," she wrote.
“Lock it in, no need to wait for the CPI,” Westac said, referencing the Board’s likely decision, while also noting the central bank could accelerate its easing path if conditions worsen further.
"Holding rates steady in the face of the global turmoil and softer momentum in the labour market – for the sake of 0.2ppts on inflation – would be very hard to explain," Lucy added.
Westpac continues to forecast three total cuts this year, including moves in August and November.
While a larger cut or inter-meeting move is seen as unlikely, the balance of risks now leans toward faster or deeper easing if global headwinds persist, Westpac added.