Reserve Bank of Australia Expected to Cut Cash Rate 25bps

The Reserve Bank of Australia (RBA) is widely expected to cut its cash rate by 25 basis points to 3.6% on August 12, 2025, marking the third rate cut this year amid easing inflationary pressures. This move follows a surprising decision in July to hold rates steady despite market expectations for a cut, reflecting the RBA's cautious and measured approach to monetary easing. The decision now lies with a newly formed nine-member Monetary Policy Board (MPB), which includes both RBA insiders and external members, making policy signals less predictable and increasing market volatility. RBA Governor Michele Bullock is anticipated to maintain a cautious stance during her follow-up press conference, aiming to preserve flexibility without overly fueling expectations for further cuts. The easing cycle, totaling an 85 basis point reduction so far, has supported sectors sensitive to borrowing costs and export competitiveness, such as mining and real estate, while also influencing the AUD/USD exchange rate amid global trade tensions. Despite the dovish tilt, the RBA's approach signals careful monitoring of inflation and global risks, maintaining a delicate balance between supporting growth and avoiding overly aggressive stimulus.