Australia’s central bank enacted its first rate cut since November 2020.
The Reserve Bank of Australia announced the benchmark interest rate will be reduced by 25 basis points to 4.10%. The central bank held the rate at 4.35% since November 2023 after 13 consecutive rate hikes designed to tame inflation.
“Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance,” said the central bank in a statement. “In the December quarter underlying inflation was 3.2%, which suggests inflationary pressures are easing a little more quickly than expected. There has also been continued subdued growth in private demand and wage pressures have eased.”
However, the central bank also warned the Australian labor market “may be somewhat tighter than previously thought” while the central forecast for underlying inflation was “revised up a little over 2026.” In calling attention to those concerns, the central bank said it “remains cautious on prospects for further policy easing.”
The Reserve Bank of Australia acknowledged it was behind other major central banks in announcing a rate cut, stating that its counterparts in other countries “have been easing monetary policy as they become more confident that inflation is moving sustainably back towards their respective targets. But market expectations for further easing have moderated somewhat in recent months, particularly in the United States.”
