The Reserve Bank of Australia will keep its cash rate unchanged on Tuesday as it waits for concrete signs of easing inflation, according to a Reuters poll of economists, who mostly still expect two rate cuts this year with the next likely in May.
The RBA delivered its first rate cut in over four years in February but has since adopted a cautious tone on further easing, with Governor Michele Bullock and other top policymakers downplaying the likelihood of multiple cuts.
While lower rates help ease cost-of-living pressures through cheaper loans and mortgage rates, aggressive rate cuts risk overheating an already expensive housing market, among the top issues for voters as Australia heads to a general election in May.
Inflation has settled within the central bank's 2-3% target range, but core inflation at 3.2% remains a concern. With a low unemployment rate and a pickup in economic growth, the RBA is likely to opt for gradual, limited cuts compared with other peer central banks.
All 39 economists in the March 24-27 poll expected the RBA to hold its official cash rate (AUCBIR=ECI) at 4.10% at the end of its two-day policy meeting on April 1.
"When their policy rate is only slightly restrictive ... then it's a little more challenging for them to be confident they've got inflation sustainably under control. I think they're happy to take it one step at a time," said Abhijit Surya, senior Asia-Pacific economist at Capital Economics.
He added that he expected two more cuts of 25 basis points each in May and August.
"The risks are fairly balanced. But if push comes to shove, maybe it's possible we only get one more 25 basis point cut. Or alternatively, we do get those 25 basis point cuts, but not as quickly," he said.
All major local banks — ANZ, CBA, NAB, and Westpac — expect rates to remain unchanged next week but differ on how low they will eventually go.
Nearly 75% of the economists expected a 25 basis point cut to 3.85% in May after the next detailed quarterly inflation data is released.
Median forecasts showed one more rate cut by end-September to 3.60% and then rates to remain there through June 2026. Interest rate futures pricing is broadly in line with the poll.
"The RBA is cognizant of the fact they can't deliver too deep of an easing cycle just given the fact supply is woefully below what the demand is. If they cut too aggressively then that probably stokes inflationary pressures," said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities.
"The message is very clear and the data has been holding up reasonably well. There is no pressing need for the RBA to deliver a deep easing cycle this time around," he said.
(Other stories from the March Reuters global economic poll)
