FEAR & GREED | Business News Interview: Why CBA thinks two more cuts might come soon
May 20, 2025
Luke Yeaman, Chief Economist at Commonwealth Bank, shares insights on the Reserve Bank's latest cash rate cut. He discusses whether inflation is truly under control, exploring the likelihood of more rate cuts this year. Yeaman examines how these changes might influence consumer behavior and the economy, highlighting cautious spending trends in Australia. The conversation also touches on the impact of the ongoing tariff war and global economic uncertainties, shedding light on Australia’s position amid these challenges.
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RBA's Shift to Balanced Inflation Risks
- The RBA shifted from worried about upside inflation risks to balanced risks, acknowledging global factors as deflationary.
- This shift supports the recent decision to cut interest rates and signals a cautious but optimistic outlook.
More Rate Cuts Expected Soon
- Inflation measure "trim mean" is now within target, indicating room for rate cuts to continue.
- CBA expects two more cuts, potentially faster than earlier predicted, to normalize cash rates around 3.35%.
Neutral Cash Rate Range Identified
- Neutral cash rate likely between 3.0% and 3.25%, balancing inflation control and low unemployment.
- Current rates are contractionary, so there's room for cuts before reaching neutral.