WEEKEND ECONOMIST: It's down to two

The Reserve Bank will bottom out at 2 per cent. But the falling dollar, resilient capex and improving housing data will see the board sit still on Tuesday.

The Reserve Bank board meets on Tuesday. Financial market and real economy developments since the May 7 meeting, at which rates were cut by 25 basis points to 2.75 per cent, have, on net, not been supportive of an immediate follow-up move. As a consequence, we now anticipate that the next move is likely to be delivered in August.

The medium term case for lower interest rates remains very clear. We retain our position that the terminal cash rate will be 2 per cent, with single moves in August, late 2013 and early 2014.

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