Financial markets believe that the Reserve Bank of Australia (RBA) will deliver another three 25 bp cuts to the official cash rate (OCR) in 2025, taking the OCR to 3.10% by year end.
However, the market ascribed roughly a 70% probability of the RBA cutting the OCR at its next meeting in July.
Belinda Allen, Senior Economist at CBA, notes that the RBA Minutes, released on Tuesday, were on the “dovish” side and confirm that a July rate cut is ‘live’.
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“The dovish language across the resolution, the truth that a 50 bp lower was thought of, and little push again from the RBA of present market pricing has lifted pricing of a July charge lower to over 70%”, famous Allen.
“The dimensions of the arguments contained within the Minutes level in the direction of a fuller dialogue of 50bp than anticipated. It seems that the arguments for no change to the money charge had been dismissed fairly shortly”…
“The July assembly is ‘reside’ given the dialogue within the Minutes. We count on it’s going to come right down to the info stream between now and the 8 July resolution”.
“The month-to-month CPI, the labour market and shopper spending knowledge will likely be vital to look at. As will the Q1 25 Nationwide Accounts, the place we now count on a softer 0.3%/qtr raise (was 0.4%/qtr) primarily based on the partials knowledge stream”.
“Leaning towards a July lower is the Truthful Work Fee resolution to raise the minimal wage by a stronger than anticipated 3.75% and an unchanged April month-to-month CPIagainst expectations of a fall”, wrote Allen.
CBA is much less dovish than the market and expects the RBA to ship two extra 25 bp cuts this yr, favouring an August and September lower.
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