July rate cut is now likely but not a shoo-in

Luci Ellis
05:12pm June 26 2025

“The next RBA rate cut is now expected to be in July rather than August, but this is not the shoo-in that markets seem to think it is,” says Westpac Chief Economist Luci Ellis.

Westpac Chief Economist Luci Ellis now expects the next Reserve Bank’s rate cut to be in July rather than August, but she does not think it’s the near-100% certainty that the market predicts.

This shift in forecast comes after the Consumer Price Index printed at 2.1 per cent in the year to May, softer than Westpac and the market’s median estimate of 2.3 per cent.

“The next RBA rate cut is now expected to be in July rather than August, but this is not the shoo-in that markets seem to think it is,” she said.

Ellis said while the May monthly CPI indicator came in below what Westpac expected, helping bring forward inflation’s return to the RBA’s 2.5% target midpoint, “some caution on the inflation outlook is likely and warranted”.

“In short, only because the RBA sees itself on a path of cutting rates soon will it decide to validate market pricing and get on with the next cut at its July meeting. But this is not the timing it previously thought it would be on.

“Given the lingering uncertainties and the RBA’s concerns about a tight labour market, expect its post-meeting language to be non-committal, even a little grudging about the decision to cut.”

Westpac Economics still think there are three further cuts after the next one with the cash rate bottoming out at 2.85 per cent but the timing will depend on the RBA’s post-meeting tone.

“As flagged when we first added the third and fourth cuts to our call, the risks are that they come sooner than February and May next year,” Ellis said.

Luci Ellis

Luci Ellis is Westpac’s economic spokesperson and is responsible for all of our economic research. She was previously Assistant Governor (Economic) at the Reserve Bank of Australia from December 2016 until October 2023. Prior to that, Luci was Head of Financial Stability Department at the RBA for eight years, spent two years on secondment at the Bank for International Settlements in Basel, Switzerland, and held several other senior positions at the RBA over a three-decade career in central banking. Luci has been a member of the Australian Statistics Advisory Council, the statutory advisory body to the Australian Bureau of Statistics, since November 2015. Luci holds a PhD from the University of New South Wales, a Masters in Economics degree from the Australian National University and a first-class Bachelor of Commerce (Honours) degree from the University of Melbourne.

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