What will likely compel the RBA to cut rates further?

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The decision of the Reserve Bank of Australia to further cut the official cash rate will depend on two factors: unemployment rate and inflation.

The central bank would likely consider cutting rates if it would be necessary to support growth and achieve its 2% to 3% inflation target, according to the latest minutes of the RBA meeting early this month.

"Members would assess developments in both the international and domestic economies, including labour market conditions, and would ease monetary policy further if needed," the minutes read.

The August unemployment figures will also be central to the RBA's decision. The unemployment rate is expected to clock in at 5.2% to 5.3%, higher than the central bank's target of 4.5%.

With this in mind, some market watchers are becoming more certain that the central bank will slash the official cash rate one more time this year to 0.75% cut rates to 0.5% by early 2020.

Westpac chief economist Bill Evans said the next rate movement will likely be next month.

"With two meetings now having passed since the last move and, from my perspective, most importantly, the key rate cut theme that 'the Australian economy could sustain lower rates of unemployment and underemployment' returning to the narrative, our central view that there is no reason to wait until November for the next move still seems reasonable," he said, adding that the RBA may make another cut by February next year, Evans said.

Also read: Big Bank Forecasts "Multiple Rate Cuts"

The RBA decided to cut the official cash rate for two consecutive months in June and July, bringing it to a historic low of 1%.

RBC economist Su-lin Ong said the central bank appears to have changed its tone, sounding less hopeful about employment and wages growth.

"The RBA's September board minutes confirmed a clear easing bias. The more dovish tinge was evident throughout the entire set of minutes," she said.

Despite the gloomy outlook on inflation and employment, the RBA seemed to be more optimistic about the housing market, given the increase in mortgage approvals and auction clearance rates.

"Members recognized that this could sow the seeds of an upswing in the housing price cycle at some point, particularly given the lengthy stages in the construction of higher-density residential housing," the minutes said.

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