Australia: RBA likely to cut in Aug as inflation cools further - UOB Group

Australia's consumer price index (CPI) rose 0.7% q/q in 2Q25, easing from the 0.9% q/q reading in 1Q25, and coming in weaker than the consensus estimate of 0.8% The slightly weaker headline inflation outcome was nonetheless in line with the Reserve Bank of Australia (RBA)'s May projection of 0.7%, UOB Group's economist Lee Sue Ann reports.

RBA expected to deliver another 75 bps of cuts in total

"Australia's CPI eased to 2.1% y/y in 2Q25, down from 2.4% y/y in 1Q25. This is the lowest annual inflation rate since 1Q21. CPI rose 0.7% q/q, slower than 0.9% q/q in 1Q25."

"Core inflation also came in weaker than expected, with the closely-watched trimmed-mean CPI rising 0.6% q/q, following a 0.7% q/q rise in 1Q25. The consensus estimate was for a 0.7% increase. The annual pace of trimmed-mean inflation slowed to 2.7% y/y from 2.9% in 1Q25."

"The latest slew of economic data reaffirms our view for a 25-bps move lower in the OCR from 3.85% to 3.60% at the next RBA meeting on 12 August. Further out, we see the cash rate being brought lower into modestly accommodative territory, with the RBA expected to deliver another 75 bps of cuts in total thereafter to reach a cyclical low of 2.85% by mid-2026."