ISCOVER
All of the big four banks now expect an interest rate drop next week.
Australia and New Zealand Banking Group (ANZ) has revised its interest rate forecast, joining the other big four banks in expecting the Reserve Bank of Australia (RBA) to cut the cash rate by 25 bps at its meeting next week (7–8 July).
ANZ was previously forecasting 25-bp cuts in both August 2025 and February 2026, but a hold in July.
However, it has now said that a 25-bp reduction in the cash rate in July is “the path of least regret”.
The major continues to expect a further 25-bp cut in August – taking the cash rate to 3.35 per cent (as it had previously forecast in April 2025) – and said it would reassess the likely pace of easing after the July meeting.
Beyond 2025, ANZ economists still expect an ‘extended pause’ to let the central bank assess the cumulative impact of the 100-bp rate drops over this calendar year.
ANZ economists explained that, in the absence of a global or domestic shock, moving beyond 3.35 per cent in quick succession would run the risk of needing to tighten policy in late 2026 or early 2027.
In an update on Wednesday (2 July), ANZ’s head of Australian economics, Adam Boyton, said the major’s forecast change was driven by weak six-month retail sales, stalling consumer confidence, and ongoing uncertainty around US trade policy as the tariff pause expiry approaches.
“That decision [to lower rates in July] will likely reflect the RBA’s Monetary Policy Board concluding that a 25bp reduction in the cash rate in July is the path of least regret, rather than waiting for the August Statement of Monetary Policy (SMP) and a full forecast update, as has been the RBA’s approach to the prior two rate cuts and the November 2023 tightening,” he added.
“Still, we think the meeting will be a much closer call than market pricing would suggest.”
At the time of writing, the ASX 30 Day Interbank Cash Rate Futures was trading at 96.34, indicating a 97 per cent expectation of an interest rate decrease to 3.60 per cent at the Monetary Policy Board meeting.
Big 4 back July cut
The move brings ANZ in line with the other major banks.
Easing inflation led the Commonwealth Bank of Australia (CBA) to last week move forward its forecast for the next cash rate cut and is also now expecting a 25-bp rate drop in July and another in August.
The decision followed the Consumer Price Index (CPI) figures showing inflation easing to 2.1 per cent for the year.
CBA cited the RBA’s dovish May decision and subsequent economic data as key factors behind the shift.
Westpac also revised its forecast to an RBA rate cut in July rather than August. However, chief economist Luci Ellis cautioned that ”this is not the shoo-in the market seems to think it is”.
National Australia Bank (NAB) was the first major to forecast that the central bank would cut rates by 25 bps in July and believes it will do so again in August and then again in November, taking the cash rate to a terminal rate of 3.1 per cent.
This year’s long-awaited rate cuts are fuelling property price growth and a steady rise in building approvals, as lower rates make it easier for borrowers to finance property construction costs.
Australian detached house building approvals rose by 3.2 per cent in May 2025 compared to the same month last year and 1.1 per cent over the past three months, according to data from the Australian Bureau of Statistics.
Tom Devitt, senior economist at the Housing Industry Association, noted on Wednesday (2 July) that “with two interest rate cuts in the back pocket, and further cuts expected, more buyers are able to sign that contract for a new home build”.
[Related: Rate forecasts shift after underlying inflation drops to 4-year low]
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