February 18, 2025 at 03:30AM
This is the first Reserve Bank of Australia cash rate cut since the cut in November 2020 to 0.1%
The RBA rate hike cycle began in May 2022 with a move to 0.35%, and the Bank has been on hold at 4.35% since last hiking in November 2023.
Full text of the statement is here.
Scan the summary headlines below, this is a ‘hawkish’ cut from the Bank. Further cuts will be slow and spaced out from here. Once every quarter would seem to be about the best to be hoped for at this stage … data dependent, of course!
Headlines via Reuters:
Reserve Bank of Australia statement on monetary policy: inflation and GDP have been softer than expected, labour market stronger
RBA: domestic financial conditions assessed to be restrictive, rates above neutral
RBA: wide range of estimates for neutral rate, but some estimates have declined
RBA: risk we have overestimated extent of excess demand in labour market
RBA: labour market still tight, but there might be more spare capacity elsewhere than thought
RBA: Q4 trimmed mean inflation softer than expected, some easing in housing and service costs
RBA: cuts inflation and unemployment forecasts, sees lower household spending but higher public demand
RBA: forecasts CPI at 2.4% June 2025, 3.2% June 2026, 2.7% June 2027
RBA: forecasts trimmed mean inflation 2.7% June 2025, 2.7% June 2026, 2.7% June 2027
RBA: forecasts GDP 2.0% June 2025, 2.3% June 2026, 2.2% June 2027
RBA: forecasts unemployment 4.2% June 2025, 4.2% June 2026, 4.2% June 2027
RBA: forecasts wage growth 3.4% June 2025, 3.2% June 2026, 3.1% June 2027
RBA: forecasts based on technical assumption cash rate at 4.0% June 2025, 3.6% December 2025, 3.4% June 2026
RBA: despite decline, A$ still close to model estimate based on terms of trade, yield differentials
RBA: U.S. economic policies pose material risks to global outlook this year and next
RBA: risk that U.S. tariffs leads to noticeable tightening in financial conditions
RBA: underlying inflation is moderating
RBA: the outlook remains uncertain
RBA: sustainably returning inflation to target is the priority
RBA: the board will continue to rely upon the data and the evolving assessment of risks to guide its decisions
RBA: board more confident that inflation is moving sustainably towards the midpoint of the 2–3 per cent target range
RBA: upside risks remain
RBA: forecasts published today suggest that, if monetary policy is eased too much too soon, disinflation could stall, and inflation would settle above the midpoint of the target range
RBA: there has also been continued subdued growth in private demand and wage pressures have eased
RBA: in removing a little of the policy restrictiveness in its decision today, the board acknowledges that progress has been made but is cautious about the outlook
RBA: board remains cautious on prospects for further policy easing
RBA: the board’s assessment is that monetary policy has been restrictive and will remain so after this reduction in the cash rate
RBA: some of the upside risks to inflation appear to have eased and there are signs that disinflation might be occurring a little more quickly than earlier expected. There are nevertheless risks on both sides
RBA: some recent labour market data have been unexpectedly strong, suggesting that the labour market may be somewhat tighter than previously thought
This article was written by Eamonn Sheridan at www.forexlive.com.
