The CBA predicts three interest rate reductions by the Reserve Bank of Australia (RBA) in 2025, specifically in May, August, and November.
TD analysts expect a rate cut in May due to signs of reduced rental inflation, which may help alleviate overall inflation and allow the RBA to lower rates.
Expected Rate Cut In August
Following the anticipated May cut, another decrease is predicted for August to support economic growth and maintain inflation within target levels.
TD also notes that global trade dynamics and tariff issues are influencing market conditions, increasing the demand for safe-haven assets and lowering bond yields, thereby supporting expectations for further monetary easing.
The Commonwealth Bank of Australia (CBA) forecasts three reductions in the cash rate by the Reserve Bank of Australia (RBA) in 2025, scheduled for May, August, and November. Expectations for these adjustments stem from economic indicators suggesting a slowdown in inflationary pressures, particularly in rental costs.
Strategists at TD Securities anticipate that the first reduction in May will be prompted by easing rental price growth, which could contribute to a broader moderation in inflation. A decline in price pressures would provide the RBA with room to bring rates down, aligning policy with shifting economic conditions.
Beyond the first adjustment, another reduction is projected for August. This move would aim to bolster economic activity while ensuring inflation remains within official targets. A measured approach to policy changes allows for consistency in supporting economic stability.
Global Trade And Market Influence
In addition to domestic conditions, external factors are shaping market expectations. TD analysts highlight that global trade policies and changes in tariffs are exerting influence on financial markets. Investors seeking stability have increased demand for lower-risk assets, leading to a decline in bond yields. This reinforces the argument that further monetary easing could be appropriate.
Given these developments, the direction of monetary policy in the coming months is becoming clearer. Expectations around inflation, external trade considerations, and financial market movements will continue to guide decisions. Actions taken by policymakers will likely reflect the shifting balance between inflation control and economic growth.
