Goldman Sachs maintains its forecast for the RBA to cut the cash rate by 25bp at its July meeting, lowering it to 3.60%, a move that is now fully priced by markets. GS continues to see a dovish bias in the outlook, with risks skewed towards a deeper easing cycle than its base case.
Key Points:
Base Case:• 25bp cut to 3.60% this week.• Additional back-to-back cut in August and a final cut in November to reach a terminal rate of 3.10%.• Risks tilt towards an even deeper easing cycle, given the soft GDP data and slowing private demand.
Statement Expectations:• Final section of the statement likely to remain little changed, still highlighting inflation around target and policy remaining “somewhat restrictive”.• Likely removal of references to a “severe downside scenario” since there is no updated Statement on Monetary Policy forecast round.• Expectation for incrementally more dovish tone on private demand, but the labour market still described as “tight”.
Governor Bullock’s Press Conference:• Expected to lean dovish, signalling the Board is open to further cuts depending on inflation and other evolving risks.• Unlikely to push back against market pricing for additional easing — instead, likely to keep forward guidance vague, citing elevated uncertainty in the outlook.
Conclusion:
Goldman sees the RBA’s message as clearly dovish, with the July cut fully priced and the door wide open for more easing in H2 if inflation and growth data disappoint. They maintain a gradual easing bias, but flag that risks remain tilted towards a deeper cycle if domestic demand continues to weaken.
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