FX.co ★ Australian dollar is preparing to reduce the rate to 0.75%

It is expected that the Central Bank of Australia, stimulating growth and inflation, will reduce the base rate this year two more times to an unprecedented low of 0.75%. Almost 70% of the 40% of economists surveyed expect the Reserve Bank of Australia (RBA) to cut its cash rate to a record low of 1% at its meeting on Tuesday and implement another cut to 0.75% by the end of the year. "The key driving force of future rate cuts, apparently, is the level of unemployment, or, more precisely, the degree of spare capacity in the labor market and the economy," economist George Taren said. Employment is growing at 2.6% per year, even though annual gross domestic product growth has slowed to below 2%. But this rapid pace is still not enough to reduce unemployment. The RBA expects the economy to start putting pressure on wages only when the unemployment rate drops to at least 4.5% from the current 5.2%. In light of these expectations, economists believe that the RBA will act more actively.

"Given that the domestic and global economic environment is likely to remain weak, we expect the market to continue to discuss possible further rate cuts, effective zero lower bound and possible unconventional monetary measures," Morgan Stanley economist Chris Reed said. The RBA, which has a reputation as a bank that "reluctantly reduces interest rates," reduced the rate to 1.25% for the first time in almost three years this month, joining a group of global central banks that have either weakened their policies or announced plans soon. The RBA took this step after the latest data painted a grim picture of an economy of $1.3 trillion, whose growth is slowing, where real estate prices are falling, household spending is falling, wages remain at the same level, and inflation is very low.