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Door wide open for July RBA cut as inflation drops to 2.1%
Headline inflation has dropped to an annual rate of just 2.1%, while core inflation has dropped to 2.4%, paving the way for another RBA cash rate cut, potentially as soon as July 8.
25 June 2025
Headline inflation has dropped to an annual rate of just 2.1%, while core inflation has dropped to 2.4%, paving the way for another RBA cash rate cut, potentially as soon as July 8.
Headline inflation has dropped to an annual rate of just 2.1%, while core inflation has dropped to 2.4%, paving the way for another RBA cash rate cut, potentially as soon as 8 July.
The ABS monthly Consumer Price Index (CPI) indicator, released today, shows Australia is making further progress in the battle against inflation.
Rents rose by 4.5% over the last 12 months, the lowest annual growth since December 2022, while the cost of new dwellings increased by just 0.8% over the 12-month period, which was the smallest annual rise since April 2021, according to the ABS.
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| Monthly CPI Indicator – annual movement | ||
|---|---|---|
| Month | CPI indicator | Annual trimmed mean |
| December 2024 | 2.5% | 2.7% |
| January 2025 | 2.5% | 2.8% |
| February 2025 | 2.4% | 2.7% |
| March 2025 | 2.4% | 2.7% |
| April 2025 | 2.4% | 2.8% |
| May 2025 | 2.1% | 2.4% |
Source: ABS Monthly Consumer Price Index Indicator.
CBA joins NAB in predicting a cash rate cut in July
The economic team from Australia’s biggest bank, CBA, has today changed its cash rate forecast on the back of today’s inflation data. It now expects the next cash rate cut will come at the end of the RBA’s Monetary Policy Board Meeting on 8 July.
Westpac and ANZ currently expect the next cash rate cut will be in August.
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| Current big four bank cash rate forecasts | |||
| Bank | Next cut | Total no. cuts | Cash rate at end of cuts |
|---|---|---|---|
| CBA | 8 July | 2 | 3.35% |
| Westpac | 12 August | 4 | 2.85% |
| NAB | 8 July | 3 | 3.10% |
| ANZ | 12 August | 2 | 3.35% |
What would the impact of a July rate cut look like for borrowers?
An owner-occupier with a $600,000 debt today, and 25 years remaining on their loan, could see their monthly repayments drop by $90 on the back of a 0.25 percentage point RBA cut in July, assuming the banks pass it on in full to existing variable rate borrowers.
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| Potential impact of a July RBA cash rate cut | ||
|---|---|---|
| New minimum monthly repayments | Difference | |
| $500,000 | $3,086 | -$75 |
| $600,000 | $3,703 | -$90 |
| $750,000 | $4,628 | -$113 |
| $1,000,000 | $6,171 | -$150 |
Source: Canstar. Notes: based on an owner-occupier paying principal and interest starting in July 2025. Calculations assume a cut in July and that the banks pass it on in full to existing variable customers.
If there are a total of two more cuts this year, as CBA expects, someone with a $600,000 debt and 25 years remaining could see their repayments drop by approximately $179 in total. If we see four cuts through to mid-2026, as Westpac expects, that same borrower could see their repayments drop by an estimated $350 in total.
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| Potential impact of rate cuts on a $600,000 loan | ||
|---|---|---|
| Rate | Change in minimum monthly repayments | |
| Current | 5.80% | – |
| 1 cut | 5.55% | -$90 |
| 2 cuts | 5.30% | -$179 |
| 3 cuts | 5.05% | -$265 |
| 4 cuts | 4.80% | -$350 |
Source: www.canstar. Notes: calculations are estimates based on owner-occupier paying principal and interest with 25 years remaining in July 2025 on the estimated RBA average variable rate of 5.80%. Assumes cash rate cuts are in July, August, February and May.
Canstar’s data insights director, Sally Tindall says, “Today’s monthly CPI results, while only an indicator, leave the door wide open for the RBA to cut the cash rate in July.”
“The fact that the Board considered the case for a double cut at the last meeting gives us good insight into its thinking and suggests it will almost certainly consider the case for a cut at the next one.
“Headline inflation is now just a fraction off the bottom of the central bank’s 2 to 3 per cent target band, while core inflation, which is the RBA’s preferred measure, is now under the halfway mark at an annual rate of 2.4 per cent.
“While the data opens the door to a cut in July, borrowers should not consider it a done deal. The Board could opt to wait for the full quarterly CPI results, which aren’t out until the end of July, before locking in another cut.
“If the RBA cuts the cash rate, whether it be in July or later in the year, it will translate into another $90 drop in minimum repayments for someone with a $600,000 mortgage with 25 years remaining. Over the course of what would then have been a total of three cash rate cuts, that’s a drop of around $275.
“If you’ve got a mortgage, spend the next couple of weeks making sure your interest rate is as low as it can be. That way you’ll be in pole position to benefit from both the RBA’s relief and any extra your bank is willing to hand out.
“While the banks are still handing out personalised rate cuts to borrowers threatening to jump ship, they’re increasingly unlikely to roll over on the first phone call. You may find that to squeeze the best deal out of your lender, you actually have to initiate the refinancing process, or at least show them a written offer from another bank.
“Don’t let this cat and mouse game put you off. Pick up the phone to one of your bank’s rivals and ask them for an offer.”
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This article was reviewed by our Finance Editor Jessica Pridmore before it was updated, as part of our fact-checking process.
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