The RBA meets next Tuesday 20 May 2025 to announce their interest rate decision.
I think they will cut by 0.25% to 3.85%.
However the RBA won’t be cutting due to lingering inflation. The inflation dragon has been defeated. Even quarterly trimmed mean inflation now sits inside the RBA’s preferred 2-3% band.
Rise of a new Dragon
The RBA will likely cut due to a golden dragon that has recently re-emerged in the USA called Trump. This dragon is erratic, totally unpredictable and spits fire at every opportunity.
The reason I think the RBA will cut is to take out some insurance against what may happen as a consequence of the dragon’s vengeance. While the dragon’s anger is pointed in all directions it seems to be primarily focused on the rising might of China.
With China firmly caught in the dragon’s sights and over 30% of our product going to China, it would be naive to think that Australia can’t inadvertently become collateral damage.
The USA accounts for approximately 25% of global GDP but recently they recorded negative (- 0.3%) quarterly GDP growth. Two quarters of negative GDP and it’s termed a recession. A slowing USA will effect everyone.
A careful RBA Governor
Every RBA Governor has their own personality in the role and Michelle Bullock is no different. She is extremely conservative, careful and deliberate with all aspects of her communications and interest rate decisioning and for the reason’s stated above I think she will cut at this meeting.
As to future interest rate decisions by the RBA, that will depend on how the golden dragon conducts itself in the future. However I note that the USA bond and stock markets have quickly taught the golden dragon a lesson that it’s powers are far more limited than it thought.
RBA to cut
The RBA meets next Tuesday 20 May 2025 to announce their interest rate decision.
I think they will cut by 0.25% to 3.85%.
However the RBA won’t be cutting due to lingering inflation. The inflation dragon has been defeated. Even quarterly trimmed mean inflation now sits inside the RBA’s preferred 2-3% band.
Rise of a new Dragon
The RBA will likely cut due to a golden dragon that has recently re-emerged in the USA called Trump. This dragon is erratic, totally unpredictable and spits fire at every opportunity.
The reason I think the RBA will cut is to take out some insurance against what may happen as a consequence of the dragon’s vengeance. While the dragon’s anger is pointed in all directions it seems to be primarily focused on the rising might of China.
With China firmly caught in the dragon’s sights and over 30% of our product going to China, it would be naive to think that Australia can’t inadvertently become collateral damage.
The USA accounts for approximately 25% of global GDP but recently they recorded negative (- 0.3%) quarterly GDP growth. Two quarters of negative GDP and it’s termed a recession. A slowing USA will effect everyone.
A careful RBA Governor
Every RBA Governor has their own personality in the role and Michelle Bullock is no different. She is extremely conservative, careful and deliberate with all aspects of her communications and interest rate decisioning and for the reason’s stated above I think she will cut at this meeting.
As to future interest rate decisions by the RBA, that will depend on how the golden dragon conducts itself in the future. However I note that the USA bond and stock markets have quickly taught the golden dragon a lesson that it’s powers are far more limited than it thought.
Let’s see!
by Boris Sfiligoi
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