Australia: RBA delivers first rate cut since Nov 2020 – UOB Group
As expected, the Reserve Bank of Australia (RBA) decided to lower the cash rate target by 25bps to 4.10% and the interest rate paid on Exchange Settlement balances to 4.00%. This is the first interest rate cut in more than four years, with the RBA citing some progress towards bringing down inflation. The central bank kept the policy rate steady since Nov 2023, following an extended period of 13 rate hikes to tame domestic inflation, UOB Group's Economist Lee Sue Ann notes.
RBA decides to lower rate targets
"As expected, the Reserve Bank of Australia (RBA) cut interest rates for the first time in more than four years, citing some progress towards bringing down inflation. The central bank kept the policy rate steady since Nov 2023, following an extended period of 13 rate hikes to tame domestic inflation."
"Nonetheless, today’s decision was a cautious one. The RBA warned that further monetary easing still hinged on more downside in inflation, and that if monetary policy is eased too much too soon, disinflation could stall, and inflation would settle above the midpoint of the target range. A tight labour market is also holding the RBA’s hand."
"All eyes will now turn to 4Q24 wage data on 19 Feb, followed by Jan’s employment figures on 20 Feb. We currently pencil in a total of 100bps of easing in 2025 (including today’s 25bps cut), taking the cash rate target to a terminal level of 3.35%. Note that there will be no meeting in Mar, and the next RBA meeting will be on 1 Apr, where we are expecting a pause."
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