Australian Treasurer says oil price growth increased bets on RBA easing

The sharp rise in oil prices following Friday's escalation of tensions between Iran and Israel has raised market participants' expectations of interest rate cuts in Australia, said the country's Treasurer Jim Chalmers.

According to him, this indicates traders are more concerned about the impact of geopolitical events on economic growth than on inflation. Chalmers added that the conflict in the Middle East is one of the key elements of global volatility. This also applies to US tariff policy, tensions in Eastern Europe, and the slowdown in China, Australia's main trading partner.

The next Reserve Bank of Australia (RBA) meeting will take place on July 7–8. As reported by Bloomberg, traders see a 90% probability of a third cut this year, lowering the rate by a quarter percentage point to 3.6%. After that, markets assume the RBA will ease monetary policy twice more this year to bring the borrowing cost to 3.1%.

Economists surveyed by Bloomberg predict two rate cuts, in August and November, to 3.35%.