ANZ cools expectation on pace of interest rate cuts
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The news: ANZ no longer expects the Reserve Bank to cut the cash rate in July following an easing in the US-China trade war, although it still says a 25 basis point cut next Tuesday is more likely than not.
The context: In the wake of Donald Trump’s ‘Liberation Day’ tariffs, ANZ previously expected a 25 basis point cut in May, July and August, taking the cash rate to 3.35%. It now expects cuts in May and August, with a third 25 basis point cut to come in Q1 2026.
“That latter cut comes with a little more uncertainty than the 2025 easings,” ANZ said.
The research note said progress in US-China trade talks “have reduced the risk of a global shock having a more pronounced and immediate impact” despite an impact on Australian business and consumer confidence.
However, they still expect household consumption and business investment to fall which would warrant additional rate cuts beyond next week.
What they said: “Looking beyond May, it is now harder to see the conditions that would be required for a July cut to eventuate over the near term,” ANZ said.
The source: ANZ research
