MNI RBA Preview-May 2025: 25bp Cut, Will CPI Reach 2.5%?
May-19 06:43By: Maxine Koster and 1 more...
Australia
EXECUTIVE SUMMARY:
- The RBA decision is announced on May 20 and a 25bp rate cut to 3.85% is widely expected (31/33 analysts on Bloomberg are forecasting -25bp with two expecting -50bp) after Q1 trimmed mean CPI fell within the 2-3% target band with activity, especially consumption, remaining lacklustre.
- The economy has broadly developed in line with the RBA's February expectations and thus forecast revisions this month are likely to be minimal.
- After stronger-than-expected Q1 wages and April employment data, the central bank is likely to retain its cautious tone though regarding the data-dependence of future easing and reiterate that uncertainty is very high.
- RBA-dated OIS pricing has a 95% probability of a 25bp rate cut in May, with a cumulative 75bps of easing priced by year-end.