While the economy appears to be narrowly avoiding recession, we expect GDP growth to average less than 1% annualised over the second half of the year, with the unemployment rate rising toward 7.3%. Core inflation is likely to remain above target before gradually heading back to 2% by mid next year. However, we believe that upside inflation risks have eased, partially due to the scrapping of the retaliatory tariffs, and the Bank has the space to cut more to support the labour market. We forecast three more 25bp cuts this cycle.
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