Summary:
The RBA Board will be meeting on Tuesday. As at the 16th of May, the ASX 30 Day Interbank Cash Rate Futures May 2025 contract was trading at 95.995, indicating a 96% expectation of an interest rate decrease to 3.85% at the next RBA Board meeting.
The RBA is expected to break away from the US Fed and lower the cash rate on Tuesday because the domestic economy is acutely exposed to the prospect of a global recession and inflation is markedly slowing, even as the full impact of US tariffs is yet to be felt. While Australia is experiencing a clear disinflationary trend, the same cannot be said for the US, where inflation has remained sticky since mid-2024.
Domestically, inflation has been slowing, and most importantly, services inflation slowed, and that’s the sticky part that has made the RBA reluctant to cut. Moreover, the domestic inflation outlook has brightened following Trump’s 145% tariff on Chinese goods. It’s entirely possible that the combination of weaker activity, coupled with disinflationary forces from the redirection of trade and goods, particularly from China, benefits Australian inflation to some degree. We will see.
US bond markets are currently pricing in between two and three quarter-percentage-point rate cuts by the Fed this year, starting in July. Meanwhile, in Australia, money markets, after the fully priced in May 30 cut, are expecting at least three further reductions anticipated thereafter.
Exhibit 1: Implied RBA Cash Rate Expectations
| Product | Interest Rate p.a. | Notes |
|---|---|---|
| AMP Saver Account | 4.95% | This is the total variable rate which applies to balances up to $500,000, made up of the standard rate and the Bonus Interest Rate (subject to eligibility). |
| ANZ Premium | 0.05% | $10,000 - $499,999 |
| ANZ Progress Saver | 3.75% | Make at least one deposit of $10 or more in a month, make no withdrawals (including transfers), or incur any fees, charges in the month. |
| Arab Bank Online Savings | 3.90% | On balances of $250,000 to $499,999 |
| Bankwest Hero Saver | 4.35% | On balances up to $250,000.99 with no withdrawals in that month |
| BOQ Fast Track Saver | 2.50% | $1000 minimum monthly deposit. On balances up to $250,000, over part the Base Rate of 0.05% p.a. applies |
| BoQ Bonus Interest Savings | 5.25% | Bonus interest is paid into your account when you limit your withdrawals to a maximum of one per month |
| CBA NetBank Saver | 4.90% | Introductory variable rate during the first 5 months of your first NetBank Saver (includes fixed bonus margin of 2.75% p.a.) |
| CBA Goal Saver Account | 4.65% | At least 1 deposit required; balance at end of month must exceed balance at start of month. |
| Great Southern Bank | 4.50% | No bonus conditions |
| Heritage Online Saver | 4.65% | a 4 month Bonus Intro Rate* available for new members on balances up to $100,000. |
| ING Savings Accelerator | 4.45% | $150,000 and over |
| Macquarie CMA | 2.75% | Minimum $5,000 |
| ME Online Savings | 4.25% | Bonus interest applies to balances up to $500,000. |
| NAB iSaver | 4.90% | This is the total rate (standard variable rate plus fixed bonus margin rate) you could earn for the first four months, if you have not held a NAB iSaver in the last 12 months (on balances up to $20 million). |
| NAB Reward Saver | 4.65% | This is the total rate (variable base rate + variable bonus rate) you could earn on your NAB Reward Saver account if you meet the variable bonus rate conditions. |
| Rabobank PremiumSaver | 5.10% | On balances to $250,000. Balance increased by $200 a month. |
| RAMS Saver Account | 1.40% | On balances to $500,000. Minimum $200 deposit each month with no withdrawals. |
| Suncorp Growth Saver | 4.80% | Minimum $200 deposit each month and no more than 1 withdrawal |
| ubank Save Account | 5.10% | 5.5% on first $100,000, 5.0% on next $150,000; applies only on amounts upto $250,000. Minimum $500 deposit each month into Spend or Save accounts. |
| Up Savers Account | 4.35% | Make 5 successful purchases using your Up or 2Up debit card or digital wallets in a month. |
| Westpac eSaver | 4.75% | 3.40% p.a. for the first 5 months for new Westpac eSaver customers |
| Westpac Reward Saver | 5.00% | Make a deposit to the account and ensure account balance is higher at the end of the month than the beginning. Keep your account balance above $0 at all times. |