What to expect from the RBA meeting in August 2025

What will the RBA do at the August 2025 meeting?

After the Reserve Bank of Australia (RBA) blindsided the nation by keeping the cash rate on hold in July 2025, fresh inflation figures and economic data are indicating that a rate cut could be on the cards in August 2025, according to economists from some of Australia’s leading banks.

The most recent quarterly Consumer Price Index (CPI) figures from the Australian Bureau of Statistics (ABS) saw annual headline inflation come in at 2.1% in the June 2025 quarter; down from 2.4% in the previous quarter. Meanwhile, trimmed mean inflation came in at 2.7% annually, down from 2.9% in the March quarter, and the lowest level since December 2021. These figures are also within the RBA’s target band of between 2% and 3%.

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Why did the RBA hold the cash rate in July 2025?

The minutes of the previous RBA meeting indicate that opinion was divided among the Monetary Policy Board members as to whether to cut the cash rate or keep it on hold. However, the case to hold proved the stronger argument, with the Board saying:

“…lowering the cash rate a third time within the space of four meetings would be unlikely to be consistent with the strategy of easing monetary policy in a cautious and gradual manner to achieve the Board’s inflation and full employment objectives.“

The board added that while recent data had been broadly in line with earlier forecasts, some data had been slightly stronger than expected, making it prudent to wait for confirmation that inflation would sustainably return to target as forecast before easing policy further.

Speaking at the Anika Foundation Fundraising Lunch, RBA Governor Michele Bullock said that the Board continues to judge that a measured and gradual approach to monetary policy easing is appropriate.

“But there is still uncertainty and unpredictability in the global economy. The Board’s view is that monetary policy is well placed to respond decisively to adverse international developments if needed.”

The Governor also said that considering the cost-of-living pressures that many Australians are experiencing, the RBA wants to make sure that inflation remains low and stable, which she described as “good for households, good for jobs, good for communities and good for the economy.”

Federal government pleased with inflation progress

Federal Treasurer Jim Chalmers said the recent inflation figures were “very encouraging,” describing them as “a powerful demonstration of the progress that Australians are making together in our economy.”

“We’ve got inflation down substantially, we’ve got real wages growing again, we’ve got the lowest average unemployment of any government in the last 50 years, we’ve got the debt down, we’ve got 2 interest rate cuts already this year providing welcome rate relief for millions of Australians with a mortgage but we know that there is more work to do.”

However, the Treasurer declined to speculate on what the independent RBA Monetary Policy Board may choose to do at the upcoming meeting.

ANZ says two more data-driven cuts this year

According to ANZ economists, the recent ABS figures confirm that inflation is heading back to the mid-point of the RBA’s inflation target band, which would indicate that the RBA will cut the cash rate by 25 basis points at the August 2025 meeting.

Additionally, when looking at Australia’s productivity, ANZ economists estimated that a “neutral” cash rate could be somewhere between 3.25% and 3.50%, which is not too far off the current cash rate of 3.85%.

With all of this in mind, ANZ is currently forecasting two rate cuts this year – one in August 2025, and again in November 2025, which would lower the national cash rate to 3.35%.

Commonwealth Bank says inflation figures “rubber stamp” an August 2025 cut

Commonwealth Bank economists have stated that the RBA’s July 2025 decision to hold the cash rate was driven by wanting to wait and see the full quarterly CPI. Given that the latest CPI figures are broadly in line against the RBA’s revised expectations, the stats effectively “rubber stamp” an August 2025 rate cut.

“Trimmed mean CPI is moderating and the disinflationary pulse in the economy appears on track based on the underlying components.”

Looking ahead, Commonwealth Bank says that given the RBA’s preference to wait for quarterly CPI data and quarterly forecast refreshes, it would take a real weakening in economic data (particularly the labour market) to consider the next RBA meeting at the end of September 2025 to be “live.” Instead, a follow-up 25 basis point rate cut in November is expected to take the cash rate back to around neutral levels.

NAB foresees August 2025 cut, plus more cuts into next year

NAB economists are also forecasting a rate cut in August 2025, followed by additional cuts to bring the cash rate back to a more neutral position.

“The move from fiscal stimulus to more neutral settings in 2025-26 reinforces our view that the appropriate path for monetary policy is for it to move to around neutral.”

Two more rate cuts are currently on NAB’s radar, to take place in November 2025 and February 2026. This would take the cash rate down to 3.10%, where NAB expects it to remain.

Westpac predicts an August 2025 cut after “relief” of CPI data

Westpac economists have opined that the recent CPI data would have come as a relief for the RBA, as “it removes any awkwardness around the signs of a renewed softening in the labour market.”

“Normally, monetary policy decisions should not come down to a single number tipping the balance. Monetary policy affects the economy with a lag and thus needs to be forward-looking. This time around, though, as in several recent quarters, the latest read for underlying inflation has been material for the RBA MPB’s upcoming decision.”

Looking ahead, Westpac’s current forecasts are for additional 25-point cuts in November 2025, then in February and May 2026, which would bring the cash rate down to 2.85%.