RBA: Revising our cash rate forecast - Standard Chartered

RBA delivered a hawkish cut and pushed back against market pricing of c.50bps more cuts in 2025. We now expect only one more 25bps cut in Q3-2025 (vs a 25bps cut in Q2 and 50bps of cuts in Q3 prior). Our end-2025 cash rate forecast moves to 3.85% (previously 3.35%) amid a secularly tight labour market. RBA may cut more than we expect if trimmed mean CPI eases at a faster-than-anticipated pace, Standard Chartered's FX and Macro Strategist Nicholas Chia notes.

Rate cut was no 'lay-down misère'

"The Reserve Bank of Australia (RBA) delivered a hawkish 25bps cut to the cash rate to 4.10%, in line with our and consensus expectations. Q4 trimmed mean CPI (3.2%) eased more than the RBA had expected (3.4%), increasing its confidence that CPI inflation is moving lower sustainably."

"We think Governor Bullock's subsequent press conference was slightly more hawkish than the RBA statement. Bullock pushed back against market pricing of RBA rate cuts and suggested there 'may not be quite as much room to go' in further rate reductions compared to its DM peers. Bullock emphasised that the 25bps cut was aimed at removing the cautionary rate hike in November 2023 rather than signalling the start of a full-fledged easing cycle, and that policy is still restrictive."

"We now expect the RBA to cut just once more in Q3-2025 as we think back-to-back quarterly cuts are unlikely, and poor productivity growth may persist, keeping unit labour costs well-supported. Our end-2025 terminal rate projection, therefore, moves to 3.85% (vs 3.35% previously). With the pre-election budget due in late-March, the RBA may be keen to monitor the impact of any further cost-of-living assistance measures on the disinflation process. The RBA may cut more than we expect if trimmed mean CPI eases at a faster pace than anticipated, or if the labour market weakens more substantially."