RBA Review: A Expected

The RBA has cut the cash rate to 3.6% in the August 12th meeting as the current inflationary pressure eases. The combination of lagged effect of easing and uncertainty in inflationary dynamics has kept the RBA from aggressive cutting. With current inflationary dynamic (headline 2.1% and trimmed 2.7% y/y), the RBA forecast underlying inflation to continue its moderation and thus they are more comfortable to cut. Their forward guidance "The Board will be attentive to the data and the evolving assessment of risks to guide its decisions." continues to point towards data dependency and suggest another cut coming soon.

There has been little changes in inflationary trajectory which shows a clear down trend even in trimmed mean CPI. But the RBA seems to be happy about the latest clarification of U.S. tariffs and corresponding policy response worldwide. While negative impact cannot be ignored, the diminishing odds of outliner outcome are welcome. Yet, RBA remains confirm on the economics and political uncertainty. 

Apart from aforementioned items, the RBA also highlighted the condition of Australian labor market. They are seeing the labor market to continue softens from historical level, still above average in the coming quarter with wage price index expected to be solid. The RBA also seems to be happy about private demand while stays vigilant on consumption recovery.

We continue to see one more 25bps cut in 2025 before a final cut in Q1 2026. The timing of the 2025 cut will likely be the November meeting, to give RBA sufficient time to assess the impact of easing and Trump's tariff policy.