Australia's record low interest rates are about to head way lower, analysts tell CNBC, as the country's central bank scrambles to play catch up in the race to the bottom for borrowing costs.
"The RBA (Reserve Bank of Australia) is acting as if someone slipped tranquilizers into their drink 18 months ago. They've just woken up and they're looking [at] the world around them and they're only gradually coming to terms with what they can see," said Michael Every, head of Asia-Pacific markets research at Rabobank.
The RBA chopped interest rates by a quarter-point on Tuesday to a historic low of 2.25 percent, surprising most economists but not the debt markets, which had priced in a 60 percent chance of a cut.
The central bank gave no hint that further easing is imminent, minutes from the meeting released Friday showed, although it did revise its 2015 growth forecast downwards to 1.75-2.75 percent, from 2-3 percent previously. Its less-than-dovish tone gave the Australia dollar a fillip against the U.S. dollar, rising to $0.7860.
No choice but to cut
But Every believes the RBA will have no choice but the bring rates even lower, with central banks the world over going on a monetary loosening spree. China, India, Russia and Canada are just a handful of major economies that have surprised with rate cuts this year. This alongside Switzerland's shock decision to remove its currency floor while moving interest rates into negative territory, and European Central Bank's widely expected decision to finally embark on a bond-purchasing program, or QE, to revive the euro zone economy.
By contrast, Australia hasn't seen changes to its monetary policy since the RBA last cut interest rates back in August 2013.
Analysts at Jefferies described in a note that the RBA's rate cut this week as "belated," and "not necessarily a surprise, [as] it came after the RBA had been on hold for 18 months."