RBA Likely to Cut Rates Following Exceptional Inflation Data

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The Reserve Bank of Australia (RBA) looks all but guaranteed to cut rates next month, after both annual headline and underlying inflation fell in the June quarter.

The Australian Bureau of Statistics released its June quarter consumer price index (CPI) data on Wednesday, with annual trimmed mean inflation — the RBA’s preferred measure — at 2.7 per cent in the year to 30 June, down from an annual rate of 2.9 per cent in the March quarter.

It’s the first time trimmed mean inflation — a measure of underlying inflation that removes the biggest price swings — has been that low since December 2021, and the second quarter it has been within the RBA’s target band of 2-3 per cent.

Headline inflation rose 0.7 per cent in the June quarter and 2.1 per cent annually, down from 0.9 and 2.4 per cent respectively in the March quarter. It’s the lowest annual inflation rate since the March 2021 quarter.

Treasurer Jim Chalmers has celebrated the figures.

“Today’s inflation numbers are outstanding,” he told Sky News. “There’s no two ways about it.”

Inflation data key to Reserve Bank’s next interest rate decision

The RBA kept rates on hold at 3.85 per cent earlier this month, defying expectations of a third cut this year following 0.25 per cent decreases in both February and May.

At the time, RBA governor Michele Bullock said the inflation data would be a key factor ahead of the board’s next meeting on 12 August, to determine whether or not inflation was still on track to sustainably reach 2.5 per cent.

“Provided we are still on top of inflation, which is what we intend to be, then, and we’re getting confirmation that we are, then, yes, there is an easing cycle coming,” she said.

“We just want to confirm with a full quarterly CPI that we’re still on track to deliver inflation continuing down to the middle of the band over time.

“That’s the reason we’re waiting. We decided to hold and we’ll reconsider again in August with this extra information and new forecasts. And that will allow us to decide whether or not we’re still on track for continuing to ease.”

A line graph showing the interest rate has been kept at 3.85 per cent in July 2025.

The Reserve Bank kept interest rates at 3.85 per cent earlier this month. Source: SBS News

The ‘big four’ banks — Commonwealth Bank, Westpac, NAB and ANZ — all agree the next rate cut will come in August, at 0.25 per cent.

Sally Tindall, financial comparison site Canstar’s data insights director, said Wednesday’s figures were “the confirmation the RBA has been waiting for”.

“Inflation is back into the target band for the second quarter in a row and continuing to track towards the mid-point of 2.5 per cent, giving the RBA a clear runway to continue easing rates,” she said.

— Additional reporting by the Australian Associated Press