The Reserve Bank is almost certain to cut interest rates again this afternoon. Economist Besa Deda says it's likely to be one of several rate cuts this year.
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00:00We're looking for a quarter of a percent today, that's a widely expected decision.
00:07Beyond that, that's the big question, how deep do they really cut?
00:11And there's some argument that I think has quite a bit of validity that they may still
00:18continue to be quite cautious about their approach.
00:22So we think there will be three more rate cuts over the next 12 months, but there's
00:27a lot of variability around that.
00:30And that's got a lot to do with what's happening in the global economy.
00:34There is a lot of fluidity around tariffs and what might happen there.
00:40There is still uncertainty, there's unpredictability.
00:44And so I think they may leave that a little bit open and they may not signal or provide
00:51a significant signal around where the cash rate might go in the near future.
00:57But by and large, the market will be anticipating more rate cuts.
01:01If we look at current interest rate pricing, markets are looking for two more rate cuts
01:06before the end of the year, one in August and one in December.
01:11And if we think about what are the factors they're really looking at?
01:14Well, they're looking at underlying inflation.
01:17That's fallen back into the Reserve Bank's target ban.
01:21So that does suggest that they, you know, favours further easing.
01:25If we look at consumer spending growth, that is quite sluggish.
01:29The latest reading showed that consumer spending volumes were flat in the March quarter and in
01:34per capita terms went backwards.
01:36Consumer confidence is still weak.
01:38The global economy has significant downside risks attached to it.
01:44But then on the flip side, the fiscal situation in Australia suggests that that is supporting
01:51spending and economic activity.
01:54And then also, if you look at the labour market, the latest jobs numbers were incredibly strong.
01:59Almost 90,000 in the month and the unemployment rate stayed steady at 4.1 per cent.
02:05But that's also running alongside soft productivity growth.
02:09And so what that means is the Reserve Bank might be a bit cautious around what that might mean
02:14for inflation and pressures going forward in terms of unit labour costs.
02:18And so, by and large, I do favour more rate cuts from the RBA, but I think they may still
02:24remain cautious, at least until they work out what's happening with the global economy.