Standard 0.25% rate cut forecast for borrowers
Expectations of a larger-than-usual interest rate cut by the Reserve Bank of Australia (RBA) next week must be tempered, a bank executive has said, following the release of stronger-than-expected employment data on Thursday.
Commonwealth Bank (CBA) chief executive Matt Comyn (pictured above) expects the RBA to ease policy slightly, citing inflation’s return toward the central bank’s 2% to 3% target band as a key reason for action.
“We certainly still think it’s likely that they will reduce by 25 basis points,” Comyn said. “I think it’s incredibly unlikely it’s more than that, even though the market seems to be pricing in some possibility of that.”
Australia’s unemployment rate held steady at 4.1% in April, with 89,000 additional jobs added — well above the 20,000 that most economists had forecast. The latest labour force figures were the final key data release ahead of the RBA’s board meeting on Tuesday, where it will decide whether to lower the cash rate from its current level of 4.1%.
According to IG market analyst Tony Sycamore, the probability of even a smaller 25-basis-point cut — previously at 90% — dropped to about 80% after the Australian Bureau of Statistics released the employment data. Stronger-than-expected job numbers, along with easing trade tensions between the US and China, have prompted money markets to revise their forecast for total rate cuts this year from 100 basis points earlier in the week to around 75 basis points.
Commonwealth Bank boss pours cold water on supersized $181 RBA interest rate cut https://t.co/pfUy461IWK
— Yahoo Finance Australia (@YahooFinanceAU) May 15, 2025
“We stick with our call for the RBA to deliver a 25-basis-point rate cut at the May board meeting as the unemployment rate and wages growth have printed broadly as the RBA expected,” said Belinda Allen, senior economist at Commonwealth Bank.
While Comyn described three cuts as “about right”, he emphasised the decision will be shaped by how data evolves through the year. Other major banks are split on the RBA’s next move. NAB has projected a 50-basis-point reduction, while Westpac and ANZ anticipate a standard 25-basis-point cut.
Based on Canstar analysis, a 25-basis-point cut would lower repayments by $91 per month on a $600,000 loan with 25 years remaining. A 50-point cut would double the savings to $181 monthly.
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