TD Securities has updated its forecast for the Reserve Bank of Australia (RBA), now projecting two 25 basis point (bps) interest rate cuts in 2025—one in August and another in November—bringing the cash rate down to 3.35%.
This revision comes amid signs of economic weakness in Australia. The March 2025 quarter saw GDP growth slow to 0.2%, with per capita GDP contracting for the ninth time in eleven quarters. Factors such as subdued consumer spending, adverse weather events, and global uncertainties have contributed to this slowdown.
Despite these challenges, the RBA remains cautious. TD say that while a July rate cut is not anticipated, the Bank could consider it as a form of “insurance” against further economic deterioration. The RBA has indicated readiness to implement rapid rate cuts if global economic disruptions, such as those stemming from US trade policies, threaten Australia’s economic stability.
Market expectations align with TD Securities’ outlook, with many economists forecasting multiple rate reductions by early 2026 to support growth. However, the RBA emphasizes that any policy adjustments will be data-dependent, balancing the need to control inflation with the goal of sustaining economic growth.
The Reserve Bank of Australia cut at its May meeting. The next meeting is scheduled for July 7 and 8.
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