ANZ economists says a 25-basis point rate cut on Tuesday is "more likely than not".

But the bank is updating its cash rate forecast which it last revised in April in the wake of the US tariff announcements.

The 2 April revision saw ANZ predicting three 25-basis point cuts in May, July, and August, taking the cash rate to 3.35%.

But on Friday, ANZ economists reverted to just two 25-basis point rate cuts in 2025 - May and August - with a final 25-basis point easing in the first quarter of 2026, although they say there's "a little more uncertainty" over the final cut.

ANZ says easing the cash rate next week is likely the "path of least regret" for the RBA, given the uncertain global backdrop, recent lift in equity markets, and encouraging inflation outcomes over the past two quarters.

Global markets have mostly recovered the ground lost when US President Donald Trump announced his trade tariff regime last month.

At that stage, some commentators were suggesting the RBA make a 50-basis point cut in May in a bid to stave off recessionary pressures.

That sentiment - along with the extent of the trade tariffs - has since eased although, as of 15 May, the Australian market was still pricing in a 51% chance of a 50-point cut to the cash rate next week, taking it to 3.60%.

ANZ economists have taken a more conservative view.

They said the most recent consumer data points to a softening in activity compared to late 2024 and their own prior expectations, which they believe the RBA shares.

They say this downside risk to consumer spending, combined with inflation moderating as the RBA had previously expected, should form the rationale for easing the rate on Tuesday. 

ANZ also predicted RBA governor Michele Bullock would not be drawn on any future outlook for interest rates in her post-meeting media conference. 

Looking beyond May, ANZ says it is now harder to see the conditions that would be required for a July cut to happen.

Signs of progress in US-China trade talks have reduced the risk of global shock although the bank expects a softer outlook for domestic activity, including household consumption and business investment, than before its previous April revision. 

While ANZ has revised its cash rate forecast, the other three big banks are sticking with their schedules.

is predicting a cut each quarter in 2025 - so May, August, and November - taking the cash rate to 3.35% by the end of the year.

is in step, also seeing cuts in May, August, and November.

remains the outlier, expecting a 50-basis point cut next week, plus cuts in July, August, November, and February 2026, taking the rate to 2.6%.

The RBA monetary policy board will meet on Monday and Tuesday, with the cash rate decision to be handed down at 2:30 pm AEST Tuesday followed by a media conference with Governor Bullock at 3:30 pm AEST.

Recent economic data, including Australia's trimmed mean inflation rate and wage price index, have printed in line with the RBA's forecasts.

While household consumption has been softer, employment data showed Australia's job sector remains relatively strong.

The X-factor, as always, is the global uncertainty, largely created by US trade policy. 

The RBA delivered its first cash rate cut in more than four years in February but held the rate steady at 4.10% at its last meeting in April. 

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