RBA Cuts 25bp, Dovish Shift in Tone

• The RBA lowered the cash rate by 25bp to 3.85% as expected, with the tone of the statement more dovish than anticipated. The Board expressed growing confidence that inflation is on track to remain within target.
• Global uncertainty, particularly around US trade policy, is expected to slow both domestic and global growth.
• Governor Bullock confirmed the Board considered three options: no change, a 25bp cut, and a larger 50bp move — highlighting downside risks.
• She noted the labour market remains tight, but household spending has been slower to recover than expected, despite improving real incomes.
• Markets quickly repriced after the meeting, with July rate cut expectations rising from 9bps to 16.5bps — implying a 66% chance of another cut at the next meeting on July 8.