Reserve Bank of Australia cuts cash rate target to 3.60%

The Reserve Bank of Australia has cut its cash rate target. Photo / Supplied

The Reserve Bank of Australia has cut its cash rate target by 25 basis points to 3.60%, in line with market expectations.

The bank said inflation had fallen substantially since the peak in 2022, as higher interest rates had been working to bring aggregate demand and potential supply closer towards balance.

“Uncertainty in the world economy remains elevated,” it said.

“There is a little more clarity on the scope and scale of US tariffs and policy responses in other countries, suggesting that more extreme outcomes are likely to be avoided,” the bank said.

“Updated staff forecasts for the August meeting suggest that underlying inflation will continue to moderate to around the midpoint of the 2-3% range, with the cash rate assumed to follow a gradual easing path,“ it said.

Research group Capital Economics expected the Reserve Bank of Australia (RBA) to ultimately slash rates to 2.85%.

“Most importantly, the bank endorsed market expectations of further loosening,” Capital Economics said in a note.

The RBA reiterated its view that it “remains cautious about the outlook”, which suggests that it will keep easing only once per quarter.

“We’ve therefore pencilled in the next rate cut at the bank’s November meeting,” Capital Economics said.

The Reserve Bank of New Zealand is due to make its Official Cash Rate decision on August 20.

Market expectations are for a quarter-point cut to 3.0%.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.

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