With the Reserve Bank of Australia (RBA) set to decide on the Australian cash rate one day before Donald Trump is set to unpause his tariffs on the world, it’s pretty much 50/50 how things could go down under.
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The market(s) – both those eyeing bonds, and, more casinoesque prediction markets – are increasingly betting we’ll get a -25bps rate cut from the RBA next week. So there’s that.
The thinking in the room so far has been that the impact of tariffs hasn’t really led, at least yet, to any significant uptick for U.S. inflation (and PPI).
At the same time, the U.S. Fed is set to make its next interest rate decision three weeks later, in late July. The U.S. CPI rate will remain a key economic data catalyst defining sentiment in FY26, let’s not forget the basics.
But bringing the Fed’s decision-making back into the spotlight has been the latest attack on Fed Chair Jerome Powell by U.S. President Trump overnight, particularly after Powell told a conference in Portugal that his tariff policy was why the Fed didn’t cut rates at its last conference.
Perhaps this genuinely angered Trump. Or perhaps he’s trying to distract from the fact his “Big Beautiful Bill” has had all kinds of progressive concessions amended to it in the last 24 hours as it suffered through the Senate.
Reuters report raises red flags
At any rate, there is perhaps one indicator the RBA might be taking a look at.
On Tuesday, Reuters put out an exclusive report based on data it commissioned a firm to collect on the prices of some ~1,500 items on U.S.-owned Amazon.
What that report found is across that selected basket of items, in aggregate, prices for each item per unit have been increasing faster than the rate of U.S. CPI growth. Which means: More inflation, more likely.
The RBA may, or may not, consider that report.
We don’t know what really happens behind closed doors beyond the painfully tame and safely worded minutes releases that come out afterwards.
But it doesn’t take tin foil to imagine what discussions take place go beyond those minutes, so we don’t really know for sure.
But if we are on the verge of an uptick in U.S. inflation, then that Reuters report could be the first real evidence we get of it.
Some have discussed the American Economy currently being like an episode of Roadrunner, when poor Wile E. Coyote runs off a cliff, and stays momentarily hovering in mid-air before falling.
RBA’s reputational capital at risk
That’s a worst-case outcome.
Of course, at the same time, Goldman Sachs has made a contrarian bullish call that U.S. CPI impacts because of tariffs will be tame, or muted, and the investment bank sees more rate cuts ahead – three, in fact, in Q4 of CY2025.
Interesting times – but while the market expects an RBA rate cut in July, those voices with extant August calls may prove to be correct.
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Right now, for the RBA to cut is perhaps the biggest gamble it’s had to face since Lowe told Australia their mortgages were safe, and that rates wouldn’t raise – ultimately having to raise interest rates not long after.
That, don’t forget, basically cost ex-RBA chief Lowe his career. Bullock probably won’t be forgetting that mistake in the lead up to July 8.
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