As inflation is easing and within target range, the Reserve Bank of Australia (RBA) is likely to cut interest rates by 25 basis points to 3.6% in August, Westpac's Chief Economist, Luci Ellis, said on Wednesday.

The oldest bank of Australia said trimmed mean inflation for the June quarter was tracking at around 0.6%, which would be 2.7% year-on-year, and "close to what the RBA wanted to see".

Westpac believes the data gives RBA's Monetary Policy Board the green light to carry on with its "cautious" approach to dropping present monetary restraints.

It expects further interest rate cuts in November, February 2026 and May 2026, bringing the cash rate to trough of 2.85%.

Westpac considers it as lower end of a neutral setting.