RBA Poised for Interest Rate Cut as Inflation Eases

The Reserve Bank of Australia is widely expected to announce an interest rate cut this afternoon, offering welcome relief to mortgage holders after July's surprise decision to keep rates unchanged.

Financial markets are placing a 99 per cent probability on a 0.25 percentage point reduction when the RBA reveals its August cash rate decision at 2:30pm AEST, following the conclusion of its two-day monetary policy meeting.

Last month, the RBA board was divided over whether to cut rates or hold steady, with the majority opting to wait for fresh inflation figures before acting. At the time, Governor Michele Bullock highlighted the importance of the upcoming quarterly consumer price index data.

That data, released at the end of July, showed annual inflation slowing to 2.1 per cent in the June quarter, down from 2.4 per cent in March. The RBA's preferred measure of underlying inflation - the "trimmed mean" - also eased, falling from 2.9 to 2.7 per cent, in line with the central bank's May forecasts.