At the RBA’s next board meeting, Tuesday 8 July 2025, I’m expecting them to cut interest rates by 0.25% to 3.60%.
A lot of water has flowed under the bridge since the last RBA board meeting 6 weeks ago when they cut by 0.25%. At this meeting the RBA had considered cutting by 0.50% due to the turbulence and uncertainty created by Mr Trump’s tariff agenda. Given this the RBA would look silly if it did not cut next Tuesday by 0.25%.
Since the last meeting we have seen;
-escalation and retaliation in the tariff war
-the stock markets drop substantially and recover
-the bond markets spike and recover
-a 12 day war in Iran with mega bombs dropped on Iran’s nuclear facilities
-a spike in oil prices.
The RBA has had to consider all this and juggle the following 2 agendas in its interest rate setting deliberations;
-the current state of the Australian economy going forward and
-the potential future impact of Mr Trump’s tariffs on inflation.
The Australian Economy
To beat down inflation the RBA has had to raise and keep interest rates elevated for a long period of time.
The brutal inflation battle has been won but economic growth has suffered. Per capita, GDP has been negative in 7 of the last 8 quarters. Consumer confidence has been weak since 2022 and retail sales have been in the doldrums for a long time. Even with the last 2 rate cuts people are still struggling.
The only thing that confounds is the continued growth in jobs but we all know that more than half of these jobs are in government sponsored NDIS and aged care sector which are part of the care economy. Is it any wonder Australia’s productivity levels are so woeful?
Mr Trumps Tariffs & Inflation
In the USA the inflation view point is different as the Federal Reserve (their Reserve Bank) has cautiously kept interest rates on hold since December 2024, to fully evaluate the potential upside impact of Mr Trump’s Tariffs on inflation.
Additionally the $USD has fallen 11% since the start of 2025 as global investors re-evaluate America as a safe place to invest.
The Federal Governor recently stated that interest rates would have already been cut in 2025 were it not for Mr Trumps tariffs. As you can imagine there has been much Trump-vitriol directed towards the Fed Governor for not cutting as yet.
While an interest rate cut at next Tuesday’s RBA board meeting is very likely, after this I wouldn’t be surprised to see the RBA sit on its hands for a little while and see how things go. One other key factor for the RBA to consider and balance is the tightness of the housing market. Every cut will stoke the market further.
However with how crazy things are in the world at the moment anything is possible.
Let’s see!
Getting the balance of turbulence right
At the RBA’s next board meeting, Tuesday 8 July 2025, I’m expecting them to cut interest rates by 0.25% to 3.60%.
A lot of water has flowed under the bridge since the last RBA board meeting 6 weeks ago when they cut by 0.25%. At this meeting the RBA had considered cutting by 0.50% due to the turbulence and uncertainty created by Mr Trump’s tariff agenda. Given this the RBA would look silly if it did not cut next Tuesday by 0.25%.
Since the last meeting we have seen;
-escalation and retaliation in the tariff war
-the stock markets drop substantially and recover
-the bond markets spike and recover
-a 12 day war in Iran with mega bombs dropped on Iran’s nuclear facilities
-a spike in oil prices.
The RBA has had to consider all this and juggle the following 2 agendas in its interest rate setting deliberations;
-the current state of the Australian economy going forward and
-the potential future impact of Mr Trump’s tariffs on inflation.
The Australian Economy
To beat down inflation the RBA has had to raise and keep interest rates elevated for a long period of time.
The brutal inflation battle has been won but economic growth has suffered. Per capita, GDP has been negative in 7 of the last 8 quarters. Consumer confidence has been weak since 2022 and retail sales have been in the doldrums for a long time. Even with the last 2 rate cuts people are still struggling.
The only thing that confounds is the continued growth in jobs but we all know that more than half of these jobs are in government sponsored NDIS and aged care sector which are part of the care economy. Is it any wonder Australia’s productivity levels are so woeful?
Mr Trumps Tariffs & Inflation
In the USA the inflation view point is different as the Federal Reserve (their Reserve Bank) has cautiously kept interest rates on hold since December 2024, to fully evaluate the potential upside impact of Mr Trump’s Tariffs on inflation.
Additionally the $USD has fallen 11% since the start of 2025 as global investors re-evaluate America as a safe place to invest.
The Federal Governor recently stated that interest rates would have already been cut in 2025 were it not for Mr Trumps tariffs. As you can imagine there has been much Trump-vitriol directed towards the Fed Governor for not cutting as yet.
While an interest rate cut at next Tuesday’s RBA board meeting is very likely, after this I wouldn’t be surprised to see the RBA sit on its hands for a little while and see how things go. One other key factor for the RBA to consider and balance is the tightness of the housing market. Every cut will stoke the market further.
However with how crazy things are in the world at the moment anything is possible.
Let’s see!
by Boris Sfiligoi
Share This
Categories
Getting It Right Matters
We choose to specialise in finding loans which create solutions.