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With the Reserve Bank of Australia (RBA) set to announce its next cash rate decision on July 8, 2025, anticipation is building over whether we will see another rate cut.
Following two rate cuts earlier this year, the official cash rate stands at 3.85%. Recent economic indicators, including easing inflation and subdued GDP growth, have led many to predict another 0.25% reduction.
What Are the Major Banks Predicting?
Here’s a summary of the latest forecasts from Australia’s major banks:
| Bank | July 2025 Prediction | End-of-Year Cash Rate Forecast |
| CBA | 0.25% cut to 3.60% | 3.35% |
| NAB | 0.25% cut to 3.60% | 3.35% |
| Westpac | 0.25% cut to 3.60% | 3.35% |
| ANZ | Hold at 3.85% | 3.35% |
What’s Driving These Predictions?
Inflation Within Target Range
The annual trimmed mean inflation rate fell to 2.4% in May, comfortably within the RBA’s 2–3% target band. This suggests that inflationary pressures are easing, providing room for rate cuts.
CBA economist Harry Ottley said the most recent inflation data for the month of May “came in at 2.1 per cent which was a little bit below what we and the market were expecting.”
“Because of this, we’re now confident that the RBA won’t see the second quarter data as troublesome” and CBA updated their expectations for an RBA rate cut in July and August.
How Much Difference Does a Rate Cut Make?
It’s important to remember, rate cuts aren’t just a headline, they can make a real impact on borrowing power. Canstar found that after the May rate cut, a single person on the average income could borrow around $12,000 more, while a couple could borrow an extra $23,000.
And for many, that extra boost matters. A Yahoo Finance poll of nearly 1,800 readers revealed that 23% said the two cuts so far in 2025 had finally allowed them to enter the property market.
Rate cuts “No shoe-in” for July
Leading economists from all major banks stressed that the RBA’s recent rhetoric is cause for doubt, with many speculating that we may not see a July cut, but rather an August rate cut.
NAB Chief Economist, Lucy Ellis stated that despite the positive inflation reading for May, the RBA may still be keen to take the wait and see approach, albeit such a move would be “harder to justify now”.
“One month’s data ordinarily wouldn’t – and shouldn’t – determine the RBA’s forecast and decision-making.”
Ellis highlighted the RBA Governor’s caution in last month’s post-meeting press conference when it comes to monthly CPI indications. “This was an explicit steer that the RBA’s thinking in May was that it did not plan to do back-to-back cuts but would wait for the quarterly CPI ahead of its August meeting,” said Ellis.
What Does This Mean for Borrowers?
If the RBA proceeds with a rate cut in July, borrowers with variable-rate mortgages could see reductions in their interest rates, potentially lowering monthly repayments. However, the extent and timing of these benefits depend on individual lenders’ decisions to pass on the rate cut.
How much can I borrow?
Use our home loan borrowing calculator to estimate how much you can afford to borrow.
Considerations for Borrowers:
- Review Your Loan: Assess whether your current mortgage is still the best fit for your financial situation.
- Consult a Broker: A mortgage broker can provide personalised guidance and help you navigate the changing interest rate landscape.
- Stay Informed: Keep an eye on announcements from your lender regarding rate changes and how they may affect your repayments.
When Will We Know?
The RBA’s decision will be announced on Tuesday, July 8, 2025, at 2:30 PM AEST. Stay tuned for updates and analysis following the announcement.
