Westpac has become the latest major bank to bring forward its RBA interest rate cut forecast. (Source: AAP)

Three of the Big Four banks now expect the Reserve Bank of Australia (RBA) will cut the cash rate when it meets in less than two weeks. Westpac is the latest bank to announce it is bringing forward its forecast, with Wednesday’s inflation data bolstering the case for rate relief.

Westpac chief economist Luci Ellis said the bank now expected the next cut in July rather than August, but warned it wasn’t the “shoe-in” that markets seem to think it is. Markets are currently pricing in an 86 per cent chance of a cut next month.

“The RBA has sometimes defied market pricing if offshore risks are being over-weighted, but now is the time to bring forward a move it knows it will likely make soon anyway,” Ellis said.

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Headline inflation eased to 2.1 per cent over the year to May, down from 2.4 per cent the previous month. Trimmed mean inflation was down to 2.4 per cent in May, from 2.8 per cent in April, which was the lowest rate since November 2021.

Commonwealth Bank yesterday brought forward its forecast and also expects the next cut in July, followed by another cut in August.

Ellis said the monthly CPI data came in below its expectations and helped to bring forward inflation’s return to the 2.5 per cent target midpoint and keep it there.

However, she warned the upcoming June quarterly inflation numbers were likely to “print on the high side”, so some caution on the inflation outlook was likely and warranted.

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CBA, Westpac and NAB expect a July cut, while ANZ is banking on an August move. · Source: AAP

Despite this, Ellis said the RBA would have been planning to cut rates soon anyway and would likely decide it “may as well get on with it rather than make a contestable argument for further delay”.

Ellis said the RBA would be shaped by concerns about the tight labour market, slow economy productivity growth and the pricing implications of recovering demand.

Westpac expects there will be a further three cuts after the July cut, bringing the cash rate down to 2.85 per cent. The timing will depend on the RBA’s post-meeting tone, with the bank currently expecting them in November, February and May.

What would a July rate cut mean for borrowers?

Westpac, Commonwealth Bank and NAB expect the next cut to come on July 8, while ANZ still expects an August cut.

A borrower with a $600,000 debt today and 25 years remaining could see their monthly repayments drop by $90 following a 0.25 per cent cut in July, according to Canstar.