🏦🇦🇺Cable FX Macro Weekly Note: RBA Rate Decision

**As seen in Risk In The Week 05/16/25, get access now! cablefxm.co.ukDuring its last meeting, the RBA decided to lower the cash rate target by 25 basis points to 3.85% and the interest rate paid on Exchange Settlement balances to 3.75%. This marks the second rate cut in 2025, following a previous reduction in February 2025 from 4.35% to 4.10%. The RBA noted that inflation has continued to decline, with headline inflation at 2.4% in the March 2025 quarter (down from 2.8% in Q4 2024) and underlying inflation (trimmed mean) at 2.7%, closer to the RBA’s 2–3% target range. This faster-than- expected disinflation provided confidence for further easing. Despite strong employment growth, the unemployment rate rose to 4.2% in April 2025, and job losses (53,000 in February) suggested a loosening labor market, reducing inflationary pressures.

Strategists at Commerzbank expect the RBA to cut its policy rate by 25bps in May to 3.85%, they noted that this is a priced in deal. The desk also sees the central bank leaving the door open for another rate cut in July. CommBank believes the RBA will stop short of providing forward guidance on the timing of further rate cuts as it did at previous meetings. Finally, analysts expect the RBA to cut rates at a quarterly pace of 25bps through the rest of the year.