Australia’s Central Bank Reduces Interest Rate by 0.25 Percent
(MENAFN) Australia’s central bank reduced its key interest rate by 0.25 percentage points on Tuesday, marking the third rate cut this year amid ongoing economic uncertainty.
The Reserve Bank of Australia (RBA) Monetary Policy Board unanimously agreed to lower the cash rate target from 3.85% to 3.6%, bringing it to its lowest level since May 2023.
This move follows two previous 25 basis point cuts in 2025, beginning in February when the RBA eased rates for the first time since 2020. Tuesday’s reduction was broadly anticipated after the board surprised markets in July by maintaining rates despite declining inflation.
Ahead of the announcement, media noted that financial markets priced in a 99 percent probability of a quarter-point cut.
In its statement, the Monetary Policy Board highlighted that inflation has decreased "substantially" from its 2022 peak but cautioned about persistent global economic risks.
"There is a little more clarity on the scope and scale of U.S. tariffs and policy responses in other countries, suggesting that more extreme outcomes are likely to be avoided. Trade policy developments are nevertheless still expected to have an adverse effect on global economic activity," the board said.
Recent figures from the Australian Bureau of Statistics (ABS) revealed Australia’s annual inflation rate stood at 2.1 percent for the year ending June 2025, while underlying inflation was 2.7 percent—both within the RBA’s 2-3 percent target band.
Looking ahead, the Monetary Policy Board said updated projections indicate underlying inflation will continue to ease toward the midpoint of the target range, with the cash rate expected to follow a gradual downward trend.
The board is scheduled to reconvene at the end of September.
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