Australia Cuts Key Interest Rate For Second Time This Year
2025-05-15
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(fxcue news) - Australia's central bank lowered its benchmark rate by a quarter-point for the second time this year as risks to inflation became more balanced, while uncertainties regarding economic outlook increased due to trade protectionism measures.
The policy board of the Reserve Bank of Australia, governed by Michele Bullock, decided to cut the cash rate target to 3.85 percent from 4.10 percent.
The current rate was the lowest in two years. Previously, the bank had reduced the rate by 25 basis points in February, which was the first cut since 2020.
The board judged that the risks to inflation became more balanced. Inflation reached the target band and upside risks appear to have diminished as international developments are set to weigh on the economy, the board observed.
"The Board assesses that this move will make monetary policy somewhat less restrictive," the bank said.
Further, policymakers observed that the monetary policy is well placed to respond decisively to international developments if they were to have material implications for activity and inflation.
Headline inflation is forecast to rise over the coming year to around the top of the band as temporary factors unwind and underlying inflation is projected to be around the midpoint of the 2-3 percent range throughout much of the forecast period.
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