Reserve Bank of Australia cuts base rate by 25 basis points, first time in four years

The Reserve Bank of Australia cuts interest rates for the first time in more than four years. The Reserve Bank of Australia cuts its base rate by 25 basis points to 4.10%, the first rate cut since November 2020, to a new low since October 2023, in line with market expectations.

"The Board will continue to rely on data and evolving risk assessments to guide its decisions," the Reserve Bank of Australia said in a statement after its February policy meeting. In doing so, it will closely monitor developments in the global economy and financial markets, domestic demand trends, and the outlook for inflation and the labour market. The Board remains committed to returning inflation to target and will take the necessary actions to achieve that outcome," the Reserve Bank of Australia said in a statement after its February policy meeting. "Today's decision removes some policy constraints and the Board determines that progress has been made, but remains cautious about the outlook," the Reserve Bank of Australia said.

With inflation approaching the upper limit of its 2-3% target, the Reserve Bank of Australia announced its first rate cut since 2020 while signalling a cautious approach to further easing.

After the rate decision, the Australian dollar rose against the U.S. dollar to $0.6364, while the policy-sensitive 3-year Treasury yield rose 1 basis point to 3.89%.

The decision is likely to give a shot in the arm to Australian Prime Minister Anthony Albanese, who will be seeking re-election before the country's May 17 election.

Reserve Bank of Australia Chair Michele Bullock will hold a post-meeting press conference at 15:30 Sydney time.

Economists polled by Reuters expect two more rate cuts this year - the market expects the cash rate target to be 3.6% by the end of this year.