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MNI RBA Preview-February 2025: Cautious February Rate Cut

The RBA is set to begin an easing cycle with a 25bp rate cut on February 18 bringing the OCR to 4.10%.
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EXECUTIVE SUMMARY: 

  • The RBA is set to begin an easing cycle with a 25bp rate cut on February 18 bringing the OCR to 4.10%, with 30 out of 34 surveyed by Bloomberg forecasting it. However, the decision is unlikely to be clear cut and as a result, the statement and press conference are likely to sound cautious.
  • The decision may be framed as a reduction in policy restrictiveness due to lower-than-expected inflation rather than a desire to be stimulatory. 
  • A 25bp rate cut in April remains more than fully priced (117%), while the probability of a cut tomorrow stands at 83%.
  • Q4 headline and trimmed mean inflation are likely to result in the updated staff forecasts being revised lower in at least 2025 and the mid-point of the band brought forward from Q4 2026. Growth will probably be revised down near term, while the unemployment rate should be shifted lower.
  • There is enough uncertainty regarding the outlook and strength in recent data to suggest that the tone around a February rate cut is likely to be cautious and that another move in April is unlikely, especially as it will be the first meeting with the new dual board structure. The following meeting in May will again include updated forecasts and have the Q1 CPI data. 

 

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EXECUTIVE SUMMARY: 

  • The RBA is set to begin an easing cycle with a 25bp rate cut on February 18 bringing the OCR to 4.10%, with 30 out of 34 surveyed by Bloomberg forecasting it. However, the decision is unlikely to be clear cut and as a result, the statement and press conference are likely to sound cautious.
  • The decision may be framed as a reduction in policy restrictiveness due to lower-than-expected inflation rather than a desire to be stimulatory. 
  • A 25bp rate cut in April remains more than fully priced (117%), while the probability of a cut tomorrow stands at 83%.
  • Q4 headline and trimmed mean inflation are likely to result in the updated staff forecasts being revised lower in at least 2025 and the mid-point of the band brought forward from Q4 2026. Growth will probably be revised down near term, while the unemployment rate should be shifted lower.
  • There is enough uncertainty regarding the outlook and strength in recent data to suggest that the tone around a February rate cut is likely to be cautious and that another move in April is unlikely, especially as it will be the first meeting with the new dual board structure. The following meeting in May will again include updated forecasts and have the Q1 CPI data.