RBA cash rate decision Tuesday - history & forecast
Event alert | RBA cash rate decision on Tuesday
The Reserve Bank of Australia (RBA) will hold its next monetary policy meeting on Tuesday this week, 20 May 2025, to set the Official Cash Rate (OCR)—the benchmark interest rate that influences borrowing costs across the economy.
As of today, the cash rate remains at 4.10%, where it has stood since April. However, financial markets are now heavily pricing in a 25 basis point cut, which would reduce the rate to 3.85%.
According to the ASX 30-Day Interbank Cash Rate Futures—widely used to infer market expectations for RBA decisions—there is a 96–98% implied probability that the RBA will act to cut on Tuesday.
Up until the strong employment growth figures released last Thursday, markets had priced in a 100% probability of a rate cut. The robust jobs data suggest that inflation remains a risk, tempering the earlier certainty.
Predicted Future Movements
The implied yields from financial markets indicate that this will not be a one-off rate cut. Instead, the market is forecasting a gradual but sustained easing cycle over the next 18 months.
By October 2025, the expected cash rate is around 3.48%. By December, it falls to 3.3%. And by October 2026, markets anticipate the rate will stabilise at 3.3%—a full 80 basis points below the current level.
The chart below tracks the official cash rate from 1990 to the present. In August 1990, the rate peaked at 14.0%. As the chart makes clear, it has declined steadily over the decades, reaching a historic low of 0.1% during the COVID-19 pandemic. The red line on the chart indicates the market's predicted path for future rate changes.
