The Reserve Bank of Australia (RBA) has lowered the cash rate target by 25 basis points to 3.60%, following its Monetary Policy Board meeting today. The move reflects continued moderation in inflation and a cautiously improving domestic outlook.
Inflation Trends Support Easing
The RBA noted that inflation has fallen significantly since its 2022 peak, with trimmed mean inflation at 2.7% and headline inflation at 2.1% in the June quarter—both in line with earlier forecasts. Updated staff projections suggest underlying inflation will continue to ease toward the midpoint of the 2–3% target range, assuming a gradual path of monetary policy adjustment.Global Economic Uncertainty Remains
While recent developments in US trade policy have reduced the likelihood of extreme outcomes, global uncertainty remains elevated. The RBA expects international trade tensions to weigh on global activity and potentially delay spending decisions by households and firms in Australia.Domestic Recovery Shows Signs of Strength
Domestically, private demand is gradually recovering, supported by rising real household incomes and easing financial conditions. However, the labour market remains tight, with the unemployment rate rising slightly to 4.3% in June. Wages growth has moderated, but unit labour costs remain high due to weak productivity growth.Market Reaction: AUD/USD Volatile After Rate Cut
The RBA’s decision to cut rates was widely anticipated, but the AUD/USD currency pair still experienced notable volatility following the announcement. Traders had priced in the rate cut, but were closely watching for signals from RBA Governor Michele Bullock’s press conference and the updated economic forecasts.AUD/USD initially dipped, reflecting expectations of further easing and softer inflation outlooks.
However, bullish sentiment returned when Governor Bullock emphasized a “measured, gradual approach” to future rate cuts, suggesting that the RBA may not rush into aggressive easing.
Market participants now expect the RBA to potentially lower the cash rate further to around 3.10% by early 2026, depending on inflation and labour market trends. The reaction underscores the delicate balance the RBA must maintain between supporting growth and preserving currency stability.
RBA Reaffirms Commitment to Stability
Today’s rate cut brings the total reduction in the cash rate to 75 basis points since the beginning of 2025. The RBA emphasized its dual mandate of price stability and full employment, and its readiness to respond to evolving global and domestic risks.“The Board will remain attentive to incoming data and the evolving assessment of risks, focusing on global economic trends, domestic demand, inflation, and labour market conditions,” the statement read.
Unanimous Decision
The decision to lower the cash rate was unanimous, reflecting a shared view among Board members that further easing was warranted under current conditions.Follow Followme for more breaking news and insights.
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