Is the RBA likely to cut rates again?

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Economists are not expecting the Reserve Bank of Australia to cut the cash rate again until February, as low rates appear to have already spurred a negative impact on banks and households.

A recent poll by Bloomberg shows that only 36% of economists are pricing for a back-to-back rate cut next month.

The central bank decided to cut the official cash rate this month, bringing it to 0.75%. This was the third cut by the RBA after it made back-to-back cuts in June and July.

In the minutes of the monetary policy meeting released earlier this week, the RBA seems to indicate that adjustments to monetary policy have become less effective.

"Members recognised that some transmission channels, such as a pick-up in borrowing or the effect on the home-building sector, may not be operating in the same way as in the past, and that the negative effect of low interest rates on the income and confidence of savers might be more significant," the minutes said.

Also read: What Will Likely Compel The RBA To Cut Rates Further?

ANZ head of economics David Plank said there appears to be a change in the tone the central bank used to project future rate cuts.

"We think the key change is that 'would ease monetary policy further' has become 'prepared to ease monetary policy further'. While this is a subtle change, we think it matters," he told The Australian Financial Review.

Plank was referring to the part of the minutes that said the RBA "was prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time."

JP Morgan economist Ben Jarman said that aside from the change in the RBA's tone and its remark about the policy being "less effective", there are other hints pointing to a pause next month.

"On the list of reasons to wait, the minutes note that monetary policy already is 'expansionary'; the tax cuts are in play and the mining and housing sectors have reached turning points; and some stimulus perhaps should be kept 'in reserve'," he told AFR.

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