RBA lowered the cash rate by 25bps to 3.60% as widely expected, with the decision passed on a unanimous vote. The new forecasts signaled room for one more cut this year, two in 2026, and a hike in 2027.
Updated economic projections showed inflation forecasts unchanged, with year-end CPI at 3.0% in 2025, 3.1% in 2026, and 2.5% in 2027. Trimmed mean inflation was also left steady at 2.6% for 2025 and 2026, easing to 2.5% in 2027.
The growth outlook, however, was revised notably lower. Year-average GDP growth for 2025 was cut from 1.9% to 1.6%, and for 2026 from 2.2% to 2.1%, with 2027 projected at 2.0%.
The forecasts are based on interest rate assumptions of 3.4% in 2025, 2.9% in 2026, and 3.1% in 2027 — implying scope for one more cut this year, two in 2026, followed a hike in 2027.
In its statement, RBA noted that uncertainty in the global economy remains elevated. While recent developments have brought “a little more clarity” on the scope of US tariffs and the policy responses from other countries, the Bank expects that “more extreme outcomes are likely to be avoided.”
Even so, trade policy uncertainty is still expected to weigh on global activity and inflation, with the risk that households and firms delay spending until there is greater clarity. The RBA said these effects will likely continue to drag on the Australian economy “for a period” .
