ABC Bullion chief economist Jordan Eliseo said the cut is indicative of the RBA’s intention to “arrest the decline in inflationary pressure which is widespread across the economy”.

AMP Capital chief economist Shane Oliver, who also predicted a cut, said while the June quarter inflation data was not low enough to make a rate cut certain, the RBA is now making moves to help ensure inflation expectations do not become entrenched below 2 per cent.

Mr Oliver said the RBA wants to “ensure there is reasonable confidence that inflation will move back into the target zone in a reasonable time frame and to head off a rebound in the Australian dollar”.

CoreLogic head of research Tim Lawless agreed that low inflation and the strength of the Australian dollar were key reasons for the cut, but said a slowdown in dwelling value growth also made it easier for the RBA to cut the cash rate.

“CoreLogic’s hedonic home value index reported a 6.1 per cent annual rise in capital city dwelling values over the year ending July, which is the lowest rate of annual growth since September 2013 and substantially lower than a year ago when dwelling values were rising at almost double the pace,” Mr Lawless said.