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Australia: Central Bank cuts rates in August
Latest bank decision: At its meeting on 12 August, the Central Bank decided to cut the cash rate by 25 basis points to 3.60%. Rates have now fallen 75 basis points so far this year.
Under-control inflation drives cut: The Bank’s decision to continue its easing cycle was partly driven by the sustained decline in inflation so far this year. Moreover, the Bank expects inflation to remain within the 2.0–3.0% target range going forward, and commented that labor market conditions have recently eased, with the unemployment rate reaching a multi-year high in June.
Rate cuts to continue: The Bank’s forward guidance was open-ended. Almost all our panelists forecast more rate cuts later this year, of 25 or 50 basis points, given that inflation should remain within-target.
Panelist insight: On the outlook, EIU analysts said:
“Prior to the RBA beginning its rate-cutting cycle, we suggested that it would move cautiously, and, accordingly, it has cut the OCR at every other meeting. That remains our base case, which means that we expect a hold at its meeting in late September followed by cuts in early November and in early February 2026.”
