At its latest meeting, the Reserve Bank Board announced it was lowering the cash rate from 3.85% to 3.60%.
What drove this decision?
There are two main reasons:
- Inflation is easing – Prices aren’t rising as quickly as before. The RBA’s preferred measure of inflation is now close to their target range of 2–3%.
- Global uncertainty – Issues like trade tensions in the US could affect economic growth, so the RBA is being cautious.
What’s happening in Australia?
- Inflation: The trimmed mean inflation (a key measure) was 2.1% in June – the lowest since 2021.
- Jobs: Unemployment rose slightly to 4.3%, showing the job market is softening
- Wages: Pay rises are strong, which can push up business costs and slow down how quickly inflation falls.
What does this mean for interest rates going forward?
The RBA is expected to continue lowering rates slowly and carefully. They may cut rates again to around 3.35% by the end of the year if inflation keeps easing and the economy remains stable.
Key takeaways:
- Lower interest rates can help reduce borrowing costs (like mortgage repayments).
- Inflation is coming down, which is good news for household budgets.
- The RBA is being cautious and will adjust rates as needed to keep the economy on track.
Please click here to view the Statement by the Monetary Policy Board: Monetary Policy Decision.
With the official rate change, we’re watching closely what the banks do with their rates, as some of Australia’s biggest lenders may make changes to their rates.
Please get in touch if you would like to discuss recent rate movements or if you would like to review your finance options.