Commonwealth Bank of Australia (ASX:CBA) said that it expects the Reserve Bank of Australia (RBA) to now cut the cash rate by 25 basis points to 3.6% at its July meeting and by another 25 basis points in August, according to a Wednesday report.

The bank expects there to be a discussion of both leaving the cash rate on hold and cutting by 25 basis points in July. However, the bank expects the case for a rate cut would be stronger based on recent data.

Australia's consumer price index (CPI) rose 2.1% in the 12 months to May, according to the Australian Bureau of Statistics. The CPI was below the bank's and the consensus estimate of 2.3%. The annual trimmed mean CPI, another metric of inflation, was 2.4% in May, declining from 2.8% in April, marking its lowest point since November 2021.

It expects that there is enough evidence for the central bank that the disinflation pulse in the economy should continue and inflation should sit around the mid-point of the target band.

The country's GDP printed below expectations at just 0.2% in the March quarter, or 1.3% year-over-year, below the central bank's estimates of 0.4%. Public demand fell for the first time since the third quarter of 2022. The NAB business survey took a turn down in May, with business conditions sitting below the long-term average. The employment subcomponent also reached a cycle low, per the report.

The unemployment rate held steady at 4.1% for the fifth consecutive month, while employment fell by 2,500, suggesting the non-accelerating rate of inflation is around current levels.