Still two cuts in 25: Boyton

The Reserve Bank of Australia’s surprise decision to leave interest rates on hold in July shouldn’t prevent the bank from making two more cuts before the end of the calendar year, according to ANZ’s Head of Australian Economics.

Adam Boyton told the 5 in 5 with ANZ podcast he expects a cut in August, followed by one more cut in November, bringing the cash rate to 3.35 per cent.

Boyton said the RBA seemed to have developed a preference for easing rates only when they have a “full statement of monetary policy and the full forecast update” available, giving weight to the possibility of an August cut.

“The bank surprised by not going [in July], but August is the next statement of monetary policy meeting,” he said.  “So I think we’ll get a rate cut in August and then one in November, which is the final statement of monetary policy meeting for this year.”

Data, global uncertainty and Australia’s growth outlook will be key factors in the RBA’s decision making, Boyton said.

“It seems like… the decision that the board took wasn’t really one about ‘Are we ending the easing cycle?’, but more one that says ‘Look, should we just wait another five weeks, get a bit more data, get the full forecast update from the staff, get the full quarterly [consumer price index], and what do we lose by waiting for those five weeks and getting that bit more information?’,” he said.

“We get a full quarterly CPI at the end of this month, which the RBA board will then have for the August board meeting. They also get a full forecast update from the RBA staff, for that next board meeting.

“There will be another labour force print, we get one next week. And then there’ll be the regular run of monthly data.”

The RBA’s next rates announcement is set for August 12.