According to a Reuters survey of economists, the majority of respondents believe that the easing of inflation will prompt the Reserve Bank of Australia to initiate a brief cycle of interest rate cuts next Tuesday (February 18), with an expected 25 basis points cut to lower the official cash rate to 4.10%.

This will be the first interest rate cut by the Reserve Bank of Australia in over four years, marking its joining the wave of interest rate cuts that other major central banks have been following since last year. In contrast, the Federal Reserve has suspended the pace of interest rate cuts due to inflation concerns.

The inflation rate in Australia dropped to 2.4% in the previous quarter, staying within the 2% -3% target range set by the Reserve Bank of Australia. This data has prompted some interviewed economists to advance their expectations of interest rate cuts from April to June to February 18th. Economists point out that the slight decline in economic growth and the slowdown in inflation have reduced the necessity for policymakers to maintain interest rates within a restricted range for a longer period of time.

The Reuters survey was conducted from February 6th to 13th, and the results showed that over 90% of economists (40 out of 43) expect the Reserve Bank of Australia to cut interest rates by 25 basis points to 4.10% at next Tuesday's policy meeting. The other three economists predict that interest rates will remain unchanged. By contrast, in the January survey, only over 40% of respondents expected the Reserve Bank of Australia to cut interest rates next Tuesday. According to data from the interest rate futures market, the likelihood of a rate cut next Tuesday is expected to be close to 80%.

Craig Vardy, head of fixed income at BlackRock Australasia, said, "The current prudent approach of the Reserve Bank of Australia is to cut interest rates, but the magnitude of the rate cuts should be small and changes in data should be observed. The worst-case scenario is that a significant rate cut will have to be reversed, which is clearly a risk scenario for the Fed

Major local banks in Australia, including ANZ, CBA, NAB, and Westpac, are all expected to cut interest rates by 25 basis points next Tuesday and predict a cumulative reduction of 50-100 basis points this year.

Among the respondents who answered the long-term forecast, over 75% (31 out of 41 respondents) expected to cut interest rates again in the April June quarter, bringing the rate down to 3.85%. According to the median forecast, interest rates will drop to 3.60% by the end of September. It is expected that there will be a longer pause period thereafter, at least until early 2026. Therefore, a total of 75 basis points of interest rate cuts are expected in this cycle.

In contrast, the Reserve Bank of New Zealand and the Federal Reserve have cumulatively reduced interest rates by 250 basis points and 150 basis points respectively since they began cutting interest rates last year. Another Reuters survey shows that analysts expect Australia's average inflation rate to be 2.8% this year, with an expected economic growth rate of 2.0%.