The recent volatility in global financial markets triggered by the UK’s vote to leave the EU is unlikely to prompt the Reserve Bank of Australia to cut interest rates from 1.75% to 1.50% at its meeting on Tuesday 5th July. However, we still believe that persistently low underlying inflation will prompt the Bank to reduce rates to 1.5% in August and to 1.0% by the end of next year. That could prompt the dollar to weaken from US$0.74 now to US$0.65 next year.
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