The RBA today left the official cash rate unchanged at 7.25 per cent but cuts might not be far away.
Glenn Stevens, monetary policy governor, said it was looking increasingly likely that demand would remain subdued and economic growth slow.
“The evidence is that the tightening in financial markets, in conjunction with other factors including rising fuel costs and lower asset values, has restrained demand,” Mr Stevens said.
“With demand slowing, the [RBA] board’s view is that scope to move towards a less restrictive stance on monetary policy in the period ahead is increasing,” he said.
Jennifer Nielsen, chief executive officer of LoanMarket Group, said she expected pressure to mount on the RBA to ease rates as the year continued but pointed out that any move may be disregarded by the banks.
“Even if the RBA does lower rates from 7.25 per cent next month, or in October, the question everyone will be asking is will the banks follow suit,” she said.
“After setting a precedent of increasing rates without any movement in the official cash rate, there is plenty of speculation about how the banks will respond to a downward move by the central bank.”
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