RBA cuts interest rates by 25 bps, sees more easing on softer inflation
Investing.com-- The Reserve Bank of Australia cut interest rates in a unanimous decision on Tuesday and signaled that it will likely ease monetary policy further in line with cooling Australian inflation.
The RBA cut its benchmark rate to 3.60% from 3.85%, in line with estimates for a 25 basis point cut. Tuesday’s cut is the RBA’s third such move this year, as it kicked off an easing cycle in the first quarter.
The RBA said that cooling inflation will likely spur more rate cuts by the central bank.
“Updated staff forecasts for the August meeting suggest that underlying inflation will continue to moderate to around the midpoint of the 2–3 per cent range, with the cash rate assumed to follow a gradual easing path,” the RBA’s monetary policy board said in a statement.
Tuesday’s cut comes after the RBA unexpectedly left interest rates on hold in July, catching markets off guard. The central bank had then cited caution over potentially sticky Australian inflation and heightened global economic uncertainty due to increased U.S. trade tariffs.
Since then, data showed further declines in Australian inflation, while the labor market was also seen cooling, with both factors opening the door for a rate reduction in August.
Markets also gained some more clarity on U.S. President Donald Trump’s trade tariffs, which took effect earlier this month at relatively lower levels than what Trump had threatened earlier this year.
The RBA reiterated that maintaining price stability and strong employment remained its two biggest considerations for interest rates. But the central bank also flagged caution over the economic outlook, amid uncertainty over both aggregate demand and potential supply.
“The Board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome.”
The Australian dollar’s AUDUSD pair reversed early gains to trade 0.1% lower after the RBA’s decision. Australia’s ASX 200 stock benchmark rose 0.2% and briefly hit a record high.
