She walked into the news conference a hawk and walked out a dove, although Michele Bullock appeared just the same.
The Reserve Bank of Australia (RBA) Governor’s comments on Tuesday on behalf of its Monetary Policy Board have convinced many market economists that official interest rates will be cut at least twice more by 25 basis points (bp) this year.
This followed her 40 minute question and answer session with journalists and a statement from the Board in the wake of the central bank announcing a widely-expected 25 bp reduction in the official rate to 3.85%.
What was most noticed by market analysts was a change in tone by the RBA from the need to keep monetary policy tighter to tackle inflation (hawkish) to a greater willingness to lower rates to support growth in the economy (dovish).
But the market had ignored attempts by the central bank in February to hose down thoughts of more cuts and continued to see two to three reductions in 2025.
Westpac, which maintained its forecast of 25 bp cuts in August and November, said the RBA’s statements about inflation, employment and the trade war highlighted a change of tone with the news conference commentary more dovish than earlier.
“Overall, this is a much less hawkish set of communication than February, or even April, and recalibrates the RBA away from its outlier view on the tightness of the domestic economy,” Westpac said in an economics note.
Goldman Sachs said the most notably dovish news was Bullock noting the Board had discussed a 50 bp reduction at its meeting this week, suggesting a clear break from its previously more cautious thinking.
“Our economists have revised their RBA call to include an additional cut at the November meeting, in addition to the cuts they continue to expect at the July and August meetings,” the investment bank said in a note.
In a daily alert, the Commonwealth Bank of Australia (CBA) said it still expected more easing in August but brought forward its expectations of a second cut to September from November as a result of the RBA meeting.
“The meeting represented a dovish change in tone with higher confidence that inflation will remain sustainably in the target band," the CBA said.
Referring in a note to the dovish comments, National Australia Bank (NAB) has pencilled in drops of 25 bp rate cuts in July, August and November to 3.1%.
ANZ Research said the statement had a more dovish tone than it expected and it forecast a 25 bp cut in August and another in the first quarter of the 2026 calendar year.
Janus Henderson Investors Fixed Interest Strategist Emma Lawson said the market was pricing in a further 125 bp of easing by the RBA due to the changing global and domestic landscape and a lower growth outlook with more manageable inflation.
“This matches our updated base case for the RBA to proceed with a, still modest, easing cycle, of around 150 (bp) in total to 2.85%,” Lawson said, referring to total cuts since the easing began in February when rates were lowered to 4.1% from 4.35%.
