RBA reveals first cash rate call for 2025

Has the time finally arrived for the Reserve Bank to cut the cash rate? In this special announcement, we reveal whether the RBA has opted to provide much-needed economic relief to home owners and mortgage holders nationwide.

After holding the cash rate in its December 2024 meeting, the board of the Reserve Bank of Australia has decided to cut the cash rate by 25 basis points, from 4.35 per cent to 4.1 per cent.

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. In the December quarter, underlying inflation was 3.2 per cent, which suggests inflationary pressures are easing a little more quickly than expected. There has also been continued subdued growth in private demand, and wage pressures have eased. These factors give the board more confidence that inflation is moving sustainably towards the midpoint of the 2–3 per cent target range.

“However, upside risks remain. Some recent labour market data have been unexpectedly strong, suggesting that the labour market may be somewhat tighter than previously thought. The central forecast for underlying inflation, which is based on the cash rate path implied by financial markets, has been revised up a little over 2026. So, while today’s policy decision recognises the welcome progress on inflation, the board remains cautious on prospects for further policy easing.”

However, the board continued, uncertainty about the outlook abroad also remains significant.

“Geopolitical and policy uncertainties are pronounced and may themselves bear down on activity in many countries if households and firms delay expenditures pending greater clarity on the outlook. Most central banks have been easing monetary policy as they become more confident that inflation is moving sustainably back towards their respective targets. But market expectations for further easing have moderated somewhat in recent months, particularly in the United States,” it said.

CoreLogic research director Tim Lawless also said that “we shouldn’t get our hopes up for a rapid or significant rate-cutting cycle in the near term”.

“The RBA is likely to remain alert to the data flows, with persistently tight labour markets, a weak Australian dollar and elevated levels of global uncertainty remaining as downside factors that are likely to keep the loosening cycle a gradual and cautious one,” he said.

“Whether the commencement of rate cuts will be enough to stave off further declines in home values is yet to be seen.”