The Reserve Bank of Australia delivered a widely expected rate cut but struck a cautious tone on further policy easing

The Reserve Bank of Australia cut interest rates by 25 basis points to 4.1% in its latest policy meeting, in line with expectations.

This marks the first rate cut since the 2020 pandemic crisis, signaling the start of a policy easing cycle aimed at providing relief to borrowers.

However, policymakers remain cautious about further reductions, emphasizing that it is too soon to declare victory over inflation, given ongoing risks from a strong labor market.

RBA Governor Bullock tempered expectations for aggressive rate cuts in 2025, stating that today’s decision does not guarantee future cuts at the pace markets anticipate. He reiterated that monetary policy remains restrictive despite the reduction and that further easing will depend on continued evidence of inflation declining.

Inflation, which picked up later in Australia compared to other economies, stood at 2.4% in Q4 2024, within the central bank’s 2-3% target range, fueling expectations for additional easing.