RBA Preview: Third Cut Locked In, Is a Jumbo Move Next?

The RBA is on track for a third rate cut this year as inflation cools and global risks bite. With a back-to-back move already priced in, the question now shifts to the path ahead: will markets stop at two more cuts by year-end—or is there room for even deeper easing?

RBA May Meeting Recap

In May, the RBA delivered its second cut of the year—25 basis points—lowering the cash rate to 3.85%. The decision was driven by soft household spending, moderating inflation, and renewed global trade tensions. Headline CPI eased to 2.4%, with core inflation at 2.9%—well within the 2–3% target range. While the labour market remains steady, momentum is clearly fading. With global uncertainties mounting, the Board made it clear: further cuts remain firmly on the table.

What to Expect This July

Even weeks ahead of the July meeting, markets had fully priced in a third consecutive cut, taking the cash rate to 3.60%. It would mark the first back-to-back cut since the pandemic and tracks closely with the dovish slope of the ASX 30-Day Interbank Futures curve, which points toward ~2.90% by mid-2026.

Recent data have only reinforced this view. Q1 household consumption remained sluggish, wage growth is cooling, and trade tensions—particularly between the U.S. and China—continue to weigh on sentiment and darken the outlook.

Rate Cut Schedule and Market Pricing:

Based on below chart, ASX futures are pricing in 75–85 bp of cuts in the second half of the year, with the cash rate seen landing around 3.10–3.20% by December. Economists are broadly in line, but the final stretch hinges on how global risks—from trade to growth—play out in the months ahead.

If the RBA signals deeper concern over the outlook, the door swings open to more cuts—or even a jumbo move. In fact, May’s meeting minutes revealed the Board had weighed a 50 bp cut before ultimately settling on the more conventional 25 bp move to 3.85%. The option’s clearly on the table.

AUD/USD Technicals:

The Aussie dollar is trading near eight-month highs, hovering around 0.6516. It’s pressing against the 50% Fibonacci retracement at 0.6451, with resistance capped at 0.6624. Momentum is mildly bullish (RSI ~55), but macro headwinds remain. A dovish surprise or renewed trade tensions could drag AUD/USD back toward 0.6400, while a hawkish shift or broader USD weakness may send it closer to 0.6787.

Conclusion

The RBA is firmly in easing mode, and a July cut looks locked in. But the key focus will be on the tone of the post-meeting statement. Will the RBA keep the door open for more cuts in H2—or adopt a more measured, wait-and-see stance as external volatility builds?

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