(Bloomberg) -- Australia’s central bank will embark on interest-rate cuts next month, according to a majority of economists polled by Bloomberg, in what would be its first monetary easing in more than four years.
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Twenty of 23 respondents anticipate the Reserve Bank will lower its cash rate to 4.10% on Feb. 18, the survey showed Friday. Three, including Barrenjoey Markets Pty Ltd and HSBC Holdings Plc, are still in the no-change camp. Financial market pricing implies about a 90% chance of a reduction.
The poll was carried out after official data on Wednesday showed core inflation eased by more than expected in the fourth quarter to inch closer to the RBA’s 2-3% target. That prompted many economists including those at Westpac Banking Corp., Royal Bank of Canada, TD Securities and AMP Ltd. to bring forward their calls for the first RBA cut to February.
The central bank will also release a quarterly update of economic forecasts alongside its rate announcement.
An easing would be the first since November 2020 when the RBA took its key rate to a record low 0.1% to help cushion the economy from the impact of harsh Covid lockdowns. The central bank then began tightening in 2022 to fight a burst of post-pandemic inflation and has kept rates at 4.35% since November 2023 awaiting a “sustainable” fall in core CPI.
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Australia’s economy has weakened considerably under elevated rates, with anemic private sector demand and a material slowdown in household consumption. At the same time, the jobless rate has hovered around a relatively low 4%.
“We do not see a weak economy requiring rate cuts, but rather a lower inflation path allowing monetary policy to become progressively less restrictive,” said Andrew Ticehurst, a senior rates strategist at Nomura Holdings Inc. in Sydney.
“We think rate cuts will be driven by quarterly CPI outcomes and updated staff forecasts, in the absence of any sharp deterioration in the labor market.”
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