Inflation touching bottom meets with rising trade protectionism, the Australian central bank may start lowering interest rates continuously for the first time in six years on Tuesday.

The Reserve Bank of Australia will convene a monetary policy meeting on July 8, with market expectations for the first consecutive interest rate cut in six years. According to surveys of economists and financial traders, the majority believe that the RBA will cut the cash rate by 25 basis points to 3.6%, totaling a 75 basis points reduction in this easing cycle. The decision comes just before the deadline for the U.S. President Trump's tariff agreement. In the backdrop of geopolitical tensions and pressures on the global economic outlook, the rate cut is seen as a manageable risk. Domestic economic data in Australia also support easing measures: monthly inflation rates are nearing the lower end of the 2%-3% target range, household spending is weak, and consumer confidence remains low. Lucy Ellis, Chief Economist at The pacific Bank and former Assistant Governor, pointed out that although the current data supports a rate cut, the RBA may choose to maintain a policy observation window before the August meeting to assess the effects of the implemented easing measures in the coming five weeks. The currency markets are predicting two further rate cuts within the year, ultimately pushing the cash rate to 3.1%. Most economists believe that 3.35% may become the critical point for pausing policy to observe the transmission effects of the previous easing on the real economy. BenJarman, economist at J.P. Morgan, analyzed that Governor Michelle Bullock may emphasize during the press conference that future rate cuts will be subject to specific conditions, delaying the market's pricing expectations for an August rate cut. On the international front, although Australia faces only a 10% tariff from the U.S., as a FTA partner with the U.S. and with a long-standing trade deficit, Prime Minister Anthony Albanese is still trying to negotiate better agreements. Rising global protectionism, escalating geopolitical conflicts, and slowing demand from China are putting pressure on Australian exports, with falling iron ore prices impacting resource income, and the Australian dollar's appreciation of over 6% this year potentially tightening the financial environment. Nick Stannea, economist at Bank of America, holds a different view, suggesting that the soon-to-be-released quarterly trimmed mean inflation indicator may exceed the midpoint target of 2.5%, and the unemployment rate may be lower than the RBA's forecast of 4.2%. Coupled with a rise in unit labor costs due to sluggish productivity growth, inflationary risks remain. This meeting also holds institutional significance: newly appointed Treasurer Jenny Wilkinson will participate in the rate decision for the first time, marking the presence of women in leadership positions in both major economic institutions in Australia. The board will also discuss enhancing policy transparency, potentially reevaluating the internal dissent disclosure mechanism, as some members have suggested disclosing more decision details to break away from traditional secrecy practices. Amidst a backdrop of diverging global central bank policies, the RBA's dovish stance is resonating with recent rate-cut actions from Europe, Canada, and the UK. In contrast, the Federal Reserve plans to maintain policies until the first half of 2025, and the Reserve Bank of New Zealand may continue its 225 basis points rate-cut cycle since August 2024 and keep rates steady after their meeting on Wednesday. Market participants will closely watch Governor Bullock's statements during the press conference to gauge the pace and extent of the easing cycle.