Westpac Chief Economist Luci Ellis is sticking with her call of an August RBA interest rate cut, despite increasing market expectations of a move in July.

The team has not changed its view that the RBA will cut twice more this year, with another reduction anticipated in November as well as the one in August. Both cuts are expected to be 0.25 percentage points.

But a lower outlook for inflation later this year and early in 2026 means that Ellis now expects an additional two cuts in 2026 following the two this year. These two cuts, also both 0.25 percentage points, are expected to occur in February and May 2026.

That would mean the RBA cash rate will bottom out at 2.85%, from a peak of 4.35%, and 3.85% currently, according to Ellis.

Ellis said the RBA Board described itself as having a preference to move cautiously and predictably which she believed was code for not wanting to do back-to-back cuts.

“It also made it clear in the minutes that this was about reducing restrictiveness, not moving quickly back to neutral in the style of the Federal Reserve last year. And the Board is not in the habit of changing policy just because the market is pricing it in.”

Ellis said it was possible that some of these cuts come a bit faster than the ‘cautious’ path Westpac Economics have pencilled in.

“This will depend on the evolving data flow, particularly for the labour market and inflation, as well as the RBA’s evolving beliefs about what constitutes full employment.”