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15h ago

Central Banks in India and Australia Gear Up for August Rate Easing

Falling inflation has opened space for both central banks to trim borrowing costs at their respective August meetings.

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The RBA’s reading on inflation removes volatile items including food prices for the month. NewsWire/ David Crosling
People walk outside a shopping mall in the Sydney Central Business District, in Sydney, Australia, May 14, 2024. REUTERS/Jaimi Joy/ File Photo
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Overview

  • India's finance ministry reported retail inflation at a six-year low of 2.82% in May, comfortably below the RBI's 4% target and strengthening the case for more repo rate cuts at the August 4–6 MPC meeting.
  • The Reserve Bank of India has already slashed its repo rate by 100 basis points since February amid persistently soft core inflation and projections that FY26 inflation will undershoot 3.7%.
  • Australia's annual CPI slowed to 2.1% in the June quarter—the lowest since March 2021—while the RBA's preferred trimmed mean rate eased to 2.7%, squarely within the bank’s 2–3% target band.
  • After holding the cash rate at 3.85% in July, RBA Governor Michele Bullock signaled that a policy easing cycle is forthcoming, pending confirmation from the full quarterly CPI data.
  • Economists at Westpac, ANZ and Commonwealth Bank forecast June-quarter trimmed mean inflation of 0.6–0.7% and anticipate the RBA will cut its cash rate by 25 basis points at the August meeting.