MNI RBA Preview-July 2025: 25bps Cut Likely

EXECUTIVE SUMMARY: 

• The RBA is widely expected to cut by 25bps at tomorrow’s policy meeting. This is the sell-side consensus, albeit with a small number of economists expecting rates to be left on hold. Financial market pricing is also consistent with a 25bps cut. Our bias is also for a 25bps cut, which would take the RBA cash rate to 3.60% (still above neutral rates). If realized this would be 75bps worth of easing delivered so far in this cycle.
• Data towards the end of June, for May monthly CPI, should give the RBA confidence to cut. Headline inflation was close to the bottom end of the RBA’s 2-3% target band, whilst the trimmed mean eased to 2.4%y/y. Services inflation is still running at a stronger pace, but we continue to move off recent highs for this sub-sector of inflation. 
• Some focus will be on the language the RBA uses and whether it considers a 50bps cut or not (assuming a 25bps cut is delivered). We feel the most likely scenario for the RBA board will be to consider holding steady or a 25bps cut. International risks are now arguably lower compared to the first part of Q2. This outlook can change quite quickly, but at the current juncture there are likely to be less fears around the global outlook. 

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK: RBA Preview - July 2025.pdf