The RBA Board delivered a ‘hawkish’ 25bp rate cut in mid-February and Governor Bullock characterised it as reversing the “cautionary” cash rate increase in November 2023. Moreover, the Board viewed market expectations for policy easing over the next year or so as too aggressive.
Since then, market pricing has shifted to factor in more RBA policy easing, with the best part of three 25bp cash rate cuts priced in by the end of this year. To a large extent this shift reflects increased pessimism about global growth as the US Administration holds its hand over the tariff button.
A cut tomorrow is assessed as a very low probability, with a May cut a much higher chance. We agree.
