Interest rate update

RBA Cuts Cash Rate to 4.10% as Inflation Eases, But Caution Remains

The Reserve Bank of Australia (RBA) has lowered its cash rate target to 4.10%, which may provide some relief to mortgage holders. This decision comes as inflation is easing, with underlying inflation falling to 3.2%. While inflation is gradually moving toward the RBA’s target range of 2-3%, the labour market remains strong, and inflation could still rise if wage pressures increase again.

The economic outlook remains uncertain. Domestic growth is slower than expected, with household spending recovering more slowly. Labor market conditions are tight, and businesses are struggling with high labour costs and slow productivity growth. There is concern that consumption growth may not increase as quickly as projected, which could lead to weaker economic growth and more strain on the labour market.

The RBA’s main focus is to bring inflation sustainably back to its target range. While recent signs suggest inflation may be easing more quickly than expected, the RBA is cautious about reducing interest rates too quickly. Any changes to monetary policy will be based on ongoing data and an assessment of global and local economic conditions. The RBA remains committed to controlling inflation while supporting employment and providing some relief to households facing higher mortgage costs.