RBA Review: Shows no urgency

The RBA has held the cash rate at 3.85% in the July 8th meeting as they are cautiously waiting for for another round of quarterly CPI before the next cut. The combination of lagged effect of easing and uncertainty in inflationary dynamics seem to be the trigger for the decision to hold, suggesting no urgency to cut. The forward guidance shows RBA being cautious toward global uncertainty. Yet, "The Board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome.", says they remain committed to further cuts.

There has been little changes in inflationary trajectory, thus the surprise only came from market participants misreading previous RBA comment. In governor Bullock's press conference, she openly suggest the market has put too much emphasis on the consideration of 50bps cut in May and that idea was quickly dismissed in the May meeting. She also kicked the can down the road by suggesting a cautious and gradual stance on further easing, which could come as early as after the next quarterly CPI release by end of July. 

The global uncertainty has kept RBA from frontloading their cuts to 3.2% terminal. We continue to see two 25bps cut in 2025 before a final cut in Q1 2026. The timing of the two cuts will likely be the August and November meeting, to give RBA sufficient time to assess the impact of easing and Trump's tariff policy. Inflation data remains critical and a trimmed mean CPI below 2.5% for the next quarter will almost seal an imminent cut.