MNI RBA Review-May 2025: Policy Outlook Depends On Trade

Download Full Report Here

EXECUTIVE SUMMARY: 

• The RBA cut rates 25bp to 3.85%, the lowest in two years, as was widely expected. It was a consensus decision following a discussion of unchanged rates vs a cut and then when the latter was chosen quickly the dialogue became between 25bp or 50bp of easing. 25bp was the strongest argument.
• The impact of current global uncertainty on economic decisions contributed to downward revisions to staff forecasts for GDP growth, inflation and employment but the outlook remains very unclear. These downward adjustments open the possibility of further easing depending on data and global developments but the RBA “remains cautious”. 
• A 25bp rate cut in July is given a 68% probability, with a cumulative 70bps of easing priced by year-end.
• The progress on trade deals and any further delays are likely to impact the RBA’s July 8 decision.