RBA seen cutting rates in July, but caution likely to persist – Westpac

Published 26/06/2025, 06:22
© Reuters.

Investing.com-- Westpac economists on Thursday said they now expect the Reserve Bank of Australia (RBA) to cut interest rates at its July policy meeting, bringing forward their forecast from August.

However, they cautioned that the move is not a certainty, noting the central bank’s lingering concerns over domestic inflation and a tight labour market.

In a note authored by Westpac Chief Economist Luci Ellis, the bank said that while softer-than-expected May inflation data supports the case for earlier easing, the RBA may still opt to wait for more clarity from the June quarter inflation print before acting.

“What we are about to see is an RBA that was planning to cut rates soon anyway deciding it may as well get on with it rather than make a contestable argument for further delay,” Ellis wrote.

But she warned that the central bank’s post-meeting tone would likely be cautious, even “grudging,” given ongoing concerns about domestic pricing pressures and weak productivity growth.

Westpac continues to project a terminal cash rate of 2.85%, implying three more cuts after July, but sees no forward guidance being offered by the RBA.

The note added that recent labour market and job vacancy data likely reinforced the RBA’s concerns, suggesting policymakers will not pivot sharply from their cautious stance despite mounting market pressure.

Another top bank in Australia, Commonwealth Bank of Australia (OTC:CMWAY), said in a note that the RBA is poised to cut interest rates by 25 basis points in July after May’s inflation reading came in softer than expected.

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