Australia Interest Rate

The Reserve Bank of Australia (RBA) slashed its cash rate by 25bps to 4.1% in its February meeting, aligning with market expectations. This marked the first rate reduction since November 2020, driven by a further slowdown in underlying inflation. The central bank expressed growing confidence that inflation is moving sustainably toward the midpoint of its 2–3% target range, citing the role of higher interest rates in balancing aggregate demand and supply. At the same time, the RBA highlighted an uncertain economic outlook, noting a slower-than-expected rebound in private demand and uncertainty over the sustainability of the household spending recovery that began in late 2024. Globally, risks remain significant, underscored by geopolitical and policy uncertainties. While joining the global easing cycle ahead of a mid-May federal election, the board remained cautious about further policy easing. The RBA also trimmed the interest rate on Exchange Settlement balances by 25bps to 4.0%.