Analysts are forecasting another hold decision by the Reserve Bank of Australia (RBA) on the current overnight cash rate of 2.75 per cent when the central bank meets on Tuesday, July 2.

They cited the weaker Australian dollar as the basis for their forecast. On Monday afternoon, the currency traded in the early afternoon at 91.71 U.S. cents but it fell to its lowest level in 34 months to 91.1 U.S. cents in early Tuesday morning.

The current key lending rate is the result of a 25 basis-point cut made by the RBA in May.

Brian Redican, chief economist at Maccquarie Group, explained that the RBA normally waits for the release by the Bureau of Statistics of inflation rate before it adjusts the overnight cash rate. He added that there was a lot of volatility in the financial markets in June which warrants the RBA to have it settle down before creating more impact on the Australian economy through a rate adjustment.

Inflation rate went up to 2.4 per cent in the last 12 months to June, slightly up from the 2.2 per cent registered in the year to May.

"Today's data support our forecast for no change in monetary policy tomorrow," Citi economists Josh Williamson and Paul Brennan wrote in a research note on Monday, quoted by the Brisbane Times.

"On balance, the data shows activity in manufacturing and the secondary housing market having improved with no increase inflation that will enable the RBA to maintain a mild easing bias," the two added.

Nomura economist Martin Whetton said that inflation data would only be released by the end of July, thus the central bank would likely wait until August before it would cut interest rates again.

"Even though the currency has fallen, the overall weakness in things like the Chinese economy, the European economy and Asia in general us enough to prompt them to go again," he said.

However, Mr Redican said that while analysts are not expecting a rate reduction on Tuesday, July 2, if the Australian economy would continue to weaken and there is an increase in unemployment, the RBA would likely need to cut rates aggressively in the next six months.

"We would expect the cash rate to fall from 2.75 per cent now down to 2 per cent by the end of the year," he forecast.