In an unprecedented move, the Reserve Bank of Australia (RBA) has cut rates for the second straight month.
Despite cutting rates to a historic low of 1.25 per cent last month, the RBA still believes the economy needs further stimulus, reducing the rates to 1.00 per cent.
Top market and economic experts were not surprised by the RBA’s decision. Comparison site Finder surveyed the nation’s leading economists and commentators, finding 27 out of 40 expected a rate change.
Mark Brimble from Griffith University believes further support is needed for the economy.
“The rationale for last month’s decrease prevail and a further move will add more support to the economy and give a point to pause and assess the impact,” Mr Brimble said.
Meanwhile, Peter Boehm, from KVB Kunlum, believes one rate cut was not enough to achieve the desired outcome and therefore would reduce rates further.
“The recent reduction of 25bps is not enough to achieve the RBA’s objectives and so a further cut is likely to occur, with further on the way,” he said.
What’s next for investors?
The July cut in the cash rate is a sign that the RBA wants to continue to stimulate the Australian economy and will take swift action to do so.
Today’s result affirmed the experts’ belief that the official cash rate would continue to fall.
Nearly three-quarters of economists foresee the bottom of the cycle at 0.75 per cent lower, according to Finder, while 10 of the 40 surveyed believe that rates will reach 0.5 per cent.