The easing path of the Australian Reserve Bank in 2026 emerges: economists predict three interest rate cuts to 3.1%, with a cautious easing pace lagging behind global peers.

Economists' latest forecast shows that the Reserve Bank of Australia may complete three interest rate cuts at the beginning of 2026. Prior to this, the bank has already implemented two rounds of rate cuts, and the current policy path is generally consistent with market pricing. According to the survey results released on Wednesday, the median forecast of 40 economists suggests that the Reserve Bank of Australia is expected to cut the cash rate from the current 3.85% to 3.1% in the first quarter of 2026, followed by a policy observation period. Although the Reserve Bank of Australia's easing pace is synchronized with central banks in the UK, Canada, New Zealand, and other countries, its overall action speed is relatively more cautious. The Federal Reserve has not yet started cutting interest rates. The Federal Reserve lowered its federal funds rate target range by 25 basis points to 4.25%-4.5% at its monetary policy meeting in December 2024. After entering 2025, the necessity of rate cuts has decreased due to strong economic growth and inflation pressures. Bloomberg Economics predicts in its global monetary outlook that most of the 23 major central banks around the world will continue the trend of moderate rate cuts in the coming months. The survey was conducted after the unexpected decision to keep rates unchanged by the Reserve Bank of Australia earlier this month, which was in contrast to market expectations of rate cuts. According to the minutes of the monetary policy committee meeting released on Tuesday, the decision-making body believes that implementing the third rate cut in four policy assessments will conflict with its "cautiously gradual" easing policy principle. Lucy Ellis, Chief Economist at The Pacific Bank, pointed out that the Reserve Bank of Australia has traditionally adjusted interest rates synchronously with the release of quarterly macroeconomic forecasts, so the rate cut in July "appears more like a result of market pricing pressure." This former assistant governor of the Reserve Bank of Australia analyzed that with the latest labor market data, the possibility of rate cuts in August has increased compared to expectations after the July meeting. Recent economic data shows that Australia's unemployment rate unexpectedly rose to a four-year high of 4.3% in June, mainly due to nearly stagnant recruitment activities. However, the annualized employment growth rate remains at 2%, which is consistent with the Reserve Bank of Australia's previous forecast. This data characteristic has led to differences in the market's expectations for future easing pace: some institutions believe that the rate cut cycle will slow down, such as the analyst Nick Stano from Bank of America, who accurately predicted the pause in rate cuts in July, and Grant Vaughn from Vanguard Investments Australia Limited, who expects the Reserve Bank of Australia to only implement two more rate cuts in the future. Mr. Vaughn pointed out: "The deflation process in Australia is expected to be relatively slow, so the central bank's rate adjustments will remain highly cautious, and the pace of rate cuts throughout the year is likely to be gradual."