RBA and Bank of Canada Signal Room for Further Rate Cuts

Reserve Bank of Australia Governor Michele Bullock said updated forecasts indicate the cash rate may have to be lowered further to keep inflation on target. She cautioned against attaching too much significance to estimates of the so-called neutral rate, noting it is only a useful concept in the absence of economic shocks. Minutes of the Bank of Canada’s 30 July policy meeting released on Wednesday reveal that, while some Governing Council members judged existing stimulus to be sufficient, others saw scope for additional rate cuts to support growth. The discussion underscored that underlying inflation dynamics will guide future decisions, with limited spillovers so far from weaker exports. The Canadian minutes also flagged the long-term inflationary effects of ‘rewiring’ global supply chains, though they said the direct impact of tariffs on consumer prices has remained modest to date. Both central banks therefore see a balance between easing policy to bolster demand and monitoring price pressures that could arise from shifting trade patterns.