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.