2019.05.2103:11:00UTC+00RBA Chief Hints Rate Cut In June

Reserve Bank of Australia Governor Philip Lowe signaled an interest rate cut in June to underpin growth in employment.

Addressing the Economic Society of Australia in Brisbane on Tuesday, Lowe said, "A lower cash rate would support employment growth and bring forward the time when inflation is consistent with the target." At the May board meeting, policymakers assessed that inflation was likely to remain low relative to the target and that a decrease in the cash rate would likely be appropriate.

"Given this assessment, at our meeting in two weeks' time, we will consider the case for lower interest rates," he said.

Lowe said the Australian economy can support an unemployment rate of below 5 percent without raising inflation concerns.

The banker said there are a number of options to reduce the unemployment rate. These include further monetary easing, additional fiscal support, including through spending on infrastructure, and structural policies that support firms expanding, investing and employing people.

"Relying on just one type of policy has limitations, so each of these is worth thinking about."

The minutes of the May meeting, released earlier today, showed that financial market pricing implied that the cash rate was expected to be lowered by 25 basis points within the next three months and again by the end of 2019.

Members noted that without an easing in monetary policy over the next six months, growth and inflation outcomes would be expected to be less favorable than the central scenario.

Marcel Thieliant, an economist at Capital Economics, said RBA is set to cut interest rates to 1.25 percent in June from 1.50 percent and follow up with another 25 basis point cut in August.