RBA delivers rate cut relief to squeezed households

Liam Cormican
and
Marina Gainulina
04:30pm February 18 2025

The Reserve Bank of Australia has cut interest rates for the first time in four years, offering much-needed relief to households struggling with cost-of-living pressures, but sounded a cautious note on the prospect of further easing. 

The RBA lowered the cash rate by 25 basis points to 4.10 per cent at its February board meeting. The decision to reduce the rate from a 13-year high reflects the central bank's assessment that monetary policy no longer needs to remain as restrictive following a benign December quarter inflation report. 

Trimmed mean inflation – the RBA’s preferred measure of underlying inflation - eased more than expected to 3.2 per cent, according to Australian Bureau of Statistics data released last month, trending down towards the RBA’s 2-3 per cent target band. 

The data “suggests inflationary pressures are easing a little more quickly than expected,” the RBA said in its statement accompanying the decision.

Westpac Chief Economist Luci Ellis had expected the move, saying in her most recent note that the RBA would draw confidence from the decline in the trimmed mean and would “act accordingly”. 

The RBA’s accompanying statement gave a balanced assessment of the risks facing the economy, saying the outlook for domestic activity and inflation remained uncertain. Likewise, geopolitical and policy uncertainties abroad were “pronounced”.  

The central bank noted that recent labour market data had been unexpectedly strong, while it also revised up its forecasts for economic growth and noted the risk that if monetary policy is eased too much too soon, the disinflation trend could stall.  

“This is a cautious cut,” said Westpac Senior Economist Justin Smirk. “On balance, they're saying that they see the risks around inflation as roughly equal on both sides, and they're still concerned about it being trapped above their target band.

“At this point in time the RBA is signalling that this is just one rate cut - don't expect anything more until we see more data.”

Westpac has announced interest rate changes for home loan and deposit customers to reflect the RBA move. For more information, visit the Westpac website. 
 

Liam Cormican

Liam is a reporter for Westpac Wire. He previously served as a financial journalist for Money Management and as a regional journalist in Nowra for Australian Community Media.

Marina Gainulina

Marina Gainulina (she/her) is a Content Producer for Westpac Wire. Graduating with a Bachelor of Communications & Media (Journalism) degree, Marina has spent a decade as a lifestyle journalist and luxury marketer, crafting commercial and editorial content for global brands including Tiffany & Co., Hugo Boss, NIVEA and GRAZIA.

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