Will the Reserve Bank of Australia cut interest rates in May?

Pound to Australian Dollar forecast GBPAUD rates fall to 1.80 as Brexit protesters take to the streets in their thousands

The Reserve Bank of Australia will be holding their next monetary policy meeting to decide what to do next with interest rates. There is a chance that we could see an interest rate cut after last week’s lower than expected inflation data.

Inflation fell from 1.8% to 1.3% and with this being underneath the target level this is a big justification to cut rates as inflation is now sitting at a 2 1/2 year low.

Indeed, when inflation fell as low as this previously the former Governor Glenn Stevens reacted by cutting interest rates in 2016.

In my opinion I think that an interest rate cut is highly likely to happen in the short term but with the Australian election being just over a fortnight away it might be too risky for the Reserve Bank of Australia to change monetary policy just yet.

However, even if the RBA does not cut rates if the suggestions by the central bank are that one is coming then I think we could see some Australian dollar weakness ahead which is good news for anyone looking to buy Australian dollars with pounds.

The pound has still remained under pressure since Article 50 was extended and we have seen the pound fall marginally against the Australian dollar. The talks between Theresa May and Jeremy Corbyn are ongoing but I cannot see much an agreement between the two coming anytime soon and with time running out before the European elections in the next three weeks I think we could see a period of uncertainty towards the end of May for the pound.

On Thursday the Bank of England will announce their own interest rate decision and as the uncertainty of Brexit continues I cannot see a change to the current level but the following press conference may gives us clues what to expect further down the line.

Having worked in the foreign exchange industry since 2003 if you have a currency transfer involving Australian dollars and the pound and would like to save money on exchange rates compared to using your own bank or another currency broker then contact me directly. I look forward to hearing from you.