Canberra: Australia’s central bank lowered interest rates for the first time in over four years on Tuesday.
The Reserve Bank of Australia (RBA) reduced the cash rate by 0.25% to 4.1%.
This is the first rate cut since November 2020 when rates dropped to a record-low 0.1%.
Borrowers will see some relief, but the bank remains cautious about further cuts.
Prime Minister Anthony Albanese benefits as he faces a tough election no later than May 17.
Election Impact
Speculation is growing that Albanese might use this opportunity to call an early election.
Markets had predicted a 0.25% cut after inflation slowed to 3.2% in the fourth quarter.
Swaps indicate only an 18% chance of another cut in April.
However, a rate reduction in May remains almost fully expected.
The RBA board acknowledges progress on inflation but warns about risks from a strong labor market.
Policy Caution
“Monetary policy remains restrictive even after this cut,” the board stated.
The Australian dollar dropped 0.1% to $0.6352 following the announcement.
Three-year bond futures fell five ticks to 96.08 after Governor Michele Bullock’s remarks.
Bullock dismissed expectations of two more rate cuts this year.
She called market pricing for further easing “unrealistic.”
Inflation Risks
Bullock stressed the need for more data confirming inflation is declining.
She made it clear that today’s decision does not guarantee future rate cuts.
The board warned that easing too soon could stall disinflation progress.
RBA officials remain wary of lowering rates too aggressively.
Economic stability remains a priority despite pressures for further cuts.
Global Trends
Australia’s central bank has been slower in easing than its global counterparts.
Meanwhile, the U.S. Federal Reserve appears to be pausing its rate reduction plans.
New Zealand is set to announce another 50-basis point cut on Wednesday.
The RBA’s approach contrasts with more aggressive monetary easing elsewhere.
Investors now watch closely for future rate movements in Australia.
