MNI RBA Review-February 2025: Cautious Easing, Not In A Hurry

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EXECUTIVE SUMMARY: 

• Lower-than-expected Q4 underlying inflation resulted in the RBA’s trimmed mean profile sitting under 3%, the top of the band, allowing the RBA to begin its easing cycle with a 25bp rate cut to 4.10%. 
• However, the move was very cautious and Governor Bullock warned that the market pricing used in the forecasts, which assumed a cash rate of 3.6% in Q4 2025, didn’t bring inflation back to the 2.5% mid-point of the band. The staff forecasts had trimmed mean staying at 2.7% from Q2 2025 on.
• A 25bp rate cut in April is given a 14% probability, with a cumulative 45bps of easing priced by year-end.
• The next monetary policy meeting is held March 31-April 1 and will be the first meeting with the new dual board structure. The cautious February rate cut seems to rule out back-to-back easing but so does this structural change, which includes appointments made by the Treasurer and a cut at its first meeting may be seen as political.