Commonwealth Bank Just Hinted a Big RBA Rate Cut: Get Ready

The Commonwealth Bank of Australia (CBA) anticipates that the Reserve Bank of Australia (RBA) will implement another interest rate cut in May 2025. This prediction is based on CBA's latest financial forecasts, which suggest a 0.6% increase in trimmed mean consumer price inflation (CPI) for the March quarter. Such a rise would bring the annual underlying inflation rate to 2.8%, aligning with the RBA's target band. ​

CBA analysts stated, "If the trimmed mean CPI is in line with our forecast (or below), then we consider a rate cut in May is a done deal."​

🏠 Impact on Borrowers: Relief in Sight

In response to the RBA's February 2025 rate cut of 0.25%, CBA reduced its home loan variable interest rates by the same margin, effective February 28, 2025. This move provided some relief to borrowers facing financial challenges.​

CBA's Group Executive, Retail Banking Services, Angus Sullivan, emphasized the bank's commitment to supporting customers: "We recognize some customers will continue to need support as they manage household budgets."​

📊 Economic Indicators: Mixed Signals

While certain sectors, such as electricity and education, have seen price increases, ongoing discounting in the housing market and holiday travel has helped keep overall inflation in check. CBA's outlook factors in a significant 15.3% quarterly jump in electricity prices as rebates unwind, along with seasonal rises in education and health costs. ​

🔮 Looking Ahead: What to Expect

CBA's forecast suggests that if inflation trends continue as predicted, the RBA is likely to implement another rate cut in May 2025. However, RBA Governor Michele Bullock has cautioned about an ongoing “period of uncertainty and adjustment,” indicating that future monetary policy decisions will depend on evolving economic data. 

📌 Key Takeaways

• CBA Predicts May Rate Cut: Based on inflation forecasts, CBA anticipates the RBA will reduce interest rates in May 2025.​

• February Rate Cut: RBA's 0.25% rate cut in February led to corresponding reductions by major banks, including CBA.​

• Inflation Trends: Mixed economic indicators suggest a cautious approach to future rate adjustments.​