HSBC joins ANZ in pulling forward RBA rate cut forecasts
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More news: HSBC has joined ANZ in pulling forward its expectation for the Reserve Bank's next interest rate cut following the major tariff announcements made by US President Donald Trump on Thursday.
HSBC now expects the central bank to cut by 25 basis points at its next meeting in May, with further cuts in the third and fourth quarter of this year and the first quarter of next year, taking the cash rate to 3.10%.
HSBC previously anticipated the next rate cut would take place in July, settling at 3.60% by Q1 2026.
What they said: "Although Australia faces only the minimum US tariff, at 10%, and commodities are substitutable across markets, offering the economy some protection, the country is still highly exposed to the global growth outlook, and particularly to growth in Asia," said Paul Bloxham, HSBC's chief economist for Australia, New Zealand and global commodities
"In particular, we see downside risk to global growth as a downside risk to local inflation.
"A key mechanism is trade diversion, as rising trade barriers to manufactured exports from Asia to the US could lead to more cheap goods exported to Australia, which is likely to put downward pressure on imported goods inflation in Australia.
"The effect of the global shock is also already impacting local household wealth through a high exposure to global equities via households' superannuation savings."
ANZ expects US tariffs to drive 'more aggressive' RBA rate cuts
The news: ANZ has changed its expectations for interest rate cuts by the Reserve Bank this year following Thursday's blockbuster tariff announcement in the US.
The numbers: The lender now predicts the central bank will make cuts of 25 basis points (bp) at each of its May, July and August meetings, which would see the cash rate fall to 3.35%.
ANZ had previously expected an "extended pause" in rate cuts following the RBA's 25bp cut in February, with the next one to come in August.
The context: ANZ said its changes were driven by the latest US tariff measures and the "likely impacts on global growth and those already evident in market sentiment".
The bank noted that more aggressive easing by the RBA "now seems more likely than not" and said it "would not rule out a 50bp cut in May, if sentiment sours and the global growth outlook deteriorates sufficiently".
What they said: "Additional easing from the RBA would offset much of the risk that a deterioration in confidence flows through to weaker consumer spending and business investment," ANZ said.
"So, our broader GDP growth, unemployment and inflation forecasts will be little impacted. Rather, the cash rate (and potentially the AUD) will make the adjustment to limit the impact on the real economy."
The sources: ANZ research, HSBC research
