Australian Bond Exchange Weekly Update
13th June 2025
Key Points
- Australia: The Reserve Bank of Australia (RBA) cut the cash rate by 25 basis points to 3.85% p.a. Headline inflation remained steady at 2.4% year on year. in April, while core inflation (which excludes volatile items) edged higher to 2.8% p.a.
- United States: The Federal Reserve held its target cash rate unchanged at 4.25%–4.50% p.a. Headline inflation for May rose to 2.4% year on year, while core inflation (excluding food and energy) remained steady at 2.8% p.a.
- United Kingdom: The Bank of England (BoE) lowered its Bank Rate by 25 basis points to 4.25% p.a. Inflation in April increased to 3.5% p.a., up from 2.6% p.a. in March.
- Eurozone: The European Central Bank (ECB) reduced interest rates by 25 basis points to 2.00% p.a. May’s inflation rate declined to 1.9% p.a., marking the first instance since 2024 that it has fallen below the ECB’s 2% p.a. target.
Market Insights
- US inflation for May increased moderately to 2.4%
- US–China trade negotiations progressing well.
- Australian confidence is improving slightly
US inflation for May increased moderately to 2.4%
Inflation in the United States rose modestly in May, with the Consumer Price Index (CPI) increasing by 0.1% month-on-month, following a 0.2% rise in April. On a year-over-year basis, CPI rose 2.4%, slightly higher than April’s 2.3%, marking the first annual uptick in inflation in four months.
Core CPI, which excludes food and energy, also rose 0.1% month-on-month, maintaining a stable 2.8% annual increase. This suggests that underlying inflationary pressures remain contained, even amid ongoing changes in global trade policy.
Core CPI, which excludes food and energy, also rose 0.1% month-on-month, maintaining a stable 2.8% annual increase. This suggests that underlying inflationary pressures remain contained, even amid ongoing changes in global trade policy.
However, concerns are emerging around the potential inflationary impact of new tariffs on imported goods. Some retailers have begun adjusting prices in anticipation, and early reports suggest certain product categories are already seeing cost increases, according to Reuters.
US-China trade negotiations progressing well
The United States and China have reached a renewed trade agreement following high-level discussions in London. The deal includes commitments on tariff reductions, expanded market access, and strengthened intellectual property protections addressing several long-standing issues in the bilateral relationship.
This marks a positive step forward in trade relations between the two global economic powers, easing tensions that have persisted in recent years. The agreement has been welcomed by financial markets and trade observers, with expectations of reduced policy uncertainty and improved investor sentiment.
That said, the long-term impact of the agreement will depend on the execution and enforcement of the outlined terms. Key challenges such as technology transfer practices and access to strategic sectors remain unresolved and could continue to pose friction in future negotiations. Nevertheless, the outcome signals a constructive shift and a renewed willingness on both sides to rebuild economic ties.
The Westpac-Melbourne Institute Consumer Sentiment Index rose slightly
The Westpac–Melbourne Institute Consumer Sentiment Index rose 0.5% to 92.6 in June, up from 92.1 in May. According to Matthew Hassan, Head of Australian Macro-Forecasting at Westpac, sentiment remains in a “holding pattern” of cautious pessimism.
The data reflects two opposing forces shaping household confidence. On the positive side, the RBA’s May interest rate cut and signs of moderating inflation are lifting optimism, particularly regarding large household purchases. However, persistent concerns around subdued domestic growth and global trade uncertainty continue to weigh heavily on broader expectations.
*Data accurate as at 13.06.2025
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