Synopsis:

Bank of America expects the Reserve Bank of Australia (RBA) to cut its policy rate by 25bps to 3.85% this week, while maintaining a cautious tone on further easing amid lingering global and domestic uncertainties.

Key Points:

• Expected Move:
  A 25bps rate cut from 4.10% to 3.85% is anticipated, aligning with market pricing and consensus forecasts.

• Drivers of the Cut:

  • Q1 inflation and wage data were broadly in line with RBA forecasts.

  • Soft consumption trends and global growth risks support a pre-emptive policy move.

• Tone of Communication:
  The RBA is expected to retain a cautious outlook, mirroring February’s messaging that highlighted uncertainties in both inflation and growth.

• Forecast Updates:

  • Growth projections likely revised downward.

  • Inflation and unemployment forecasts to remain largely unchanged.

Conclusion:

BofA sees the RBA beginning its easing cycle with a 25bps cut, but emphasizes that further rate reductions will depend on clearer signs of economic slowdown and inflation convergence toward target. The central bank is expected to proceed carefully.