RBC Capital Markets chief economist Su-Lin Ong anticipates the Reserve Bank of Australia (RBA) to commence easing monetary policy again in August. This projection follows the release of the July RBA minutes, which confirmed a cautious approach but indicated a clear bias towards cutting rates, contingent on the upcoming June quarter inflation data. Ong suggests that the RBA’s inclination for a “cautious and gradual” strategy implies a quarterly pace of rate cuts.
According to RBC’s analysis, rate adjustments are likely to occur in August, November, and the first quarter of 2026. These moves are expected to bring the terminal rate to approximately 3.1 per cent. Ong stated that the July minutes affirmed the RBA’s cautious stance, highlighting the need for confirmation that inflation is comfortably within the target range and trending towards the midpoint before implementing further cuts.
Despite a split vote of 6:3 and some nuanced language within the minutes, RBC maintains that the overall message aligns with the RBA’s May forecasts. These forecasts assumed a terminal rate slightly above 3 per cent by mid-2026. The RBA continues to express uncertainty regarding the neutral rate and remains vigilant about subdued productivity growth and softening in non-market employment, suggesting potential downside risks to economic activity.
Given that inflation is tracking towards the upper end of the target range and the labour market is exhibiting signs of rebalancing, RBC believes the RBA board sees minimal risk in waiting an additional month to confirm the prevailing trend. This cautious approach reflects the central bank’s commitment to ensuring sustainable economic stability and achieving its inflation objectives.
