RBA makes second cash rate call for 2025

After finally cutting rates for the first time since November 2020, and in anticipation of the federal election, mortgage holders and voters alike are keen to get more cost-of-living relief from the Reserve Bank. So, what did the RBA decide at this week’s meeting?

After cutting the cash rate by 25 basis points at its February 2025 meeting, the board of the Reserve Bank of Australia has today (Tuesday, 1 April) decided to hold the cash rate at its current level.

In a statement, the board said: “Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance. Recent information suggests that underlying inflation continues to ease in line with the most recent forecasts published in the February Statement on Monetary Policy. Nevertheless, the board needs to be confident that this progress will continue so that inflation returns to the midpoint of the target band on a sustainable basis. It is therefore cautious about the outlook.”

However, the board added that the outlook remains uncertain.

“Private domestic demand appears to be recovering, real household incomes have picked up, and there has been an easing in some measures of financial stress. However, businesses in some sectors continue to report that weakness in demand makes it difficult to pass on cost increases to final prices,” it said.

“At the same time, a range of indicators suggest that labour market conditions remain tight. Despite a decline in employment in February, measures of labour underutilisation are at relatively low rates, and business surveys and liaison suggest that availability of labour is still a constraint for a range of employers. Wage pressures have eased a little more than expected, but productivity growth has not picked up, and growth in unit labour costs remains high.

“There are notable uncertainties about the outlook for domestic economic activity and inflation. The central projection is for growth in household consumption to continue to increase as income growth rises. But there is a risk that any pick-up in consumption is slower than expected, resulting in continued subdued output growth and a sharper deterioration in the labour market than currently expected. Alternatively, labour market outcomes may prove stronger than expected, given the signal from a range of leading indicators.”