Commonwealth Bank senior economist Belinda Allen anticipates the Reserve Bank of Australia (RBA) will reduce the cash rate by 25 basis points to 3.60 per cent next Tuesday. Allen describes the decision as “straightforward” due to recent data confirming inflation is decreasing as forecast. Commonwealth Bank is a multinational bank providing various financial services, including retail, business and institutional banking, funds management, superannuation, insurance, investment and broking services. The company serves millions of customers and operates across Australia and internationally.
This move would represent the RBA’s third rate cut in the current easing cycle, following a surprise decision in July to hold rates steady despite indicators of a softening economy. Allen expects a unanimous vote from the board this time, stating that “The Q2 CPI data has given the green light.” Trimmed mean inflation has slowed to 2.7 per cent year-on-year, a decrease from 2.9 per cent in the March quarter.
Allen also noted that previous RBA concerns surrounding dwelling construction costs, durable goods, and market services inflation have largely dissipated. She predicts a further 25-basis-point cut in November and highlights the possibility of a third cut in early 2026, which would bring the cash rate down to 3.10 per cent.
While the market currently sees a one-in-three chance of a September cut, Allen believes the RBA will likely maintain a quarterly schedule unless there is a significant rise in unemployment. The RBA will release updated economic forecasts alongside its decision on Tuesday. Allen expects only minor changes to inflation projections, previously based on the cash rate falling to 3.2 per cent by mid-2027. However, she notes that market pricing now suggests a terminal rate closer to 3 per cent, which could lead to slight upward revisions in GDP forecasts.