RBA to deliver first interest rate cut in years as inflation cools
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The Reserve Bank of Australia is expected to cut the OCR by 25 basis points. Australian core inflation eased in the final quarter of 2024 but remained above the RBA’s target. The Australian Dollar consolidates gains against its American rival ahead of the announcement. The Reserve Bank of Australia (RBA) will announce its first monetary policy decision of 2025 on Tuesday, and market participants anticipate the Board will cut the benchmark interest rate by 25 basis points (bps). Since hiking the Official Cash Rate (OCR) to 4.35% in November 2023, the RBA has maintained it steady at this level, as inflation has remained stubbornly high. As a result, pressure on households and businesses has become a significant concern, with sluggish economic growth taking its toll on policymakers’ decisions. Will this be the first of multiple interest rate cuts in Australia? Indeed, inflation in Australia has given signs of improvement in December, boosting the odds for an interest rate cut in February. The latest quarterly Consumer Price Index (CPI) released showed that inflation rose by less than anticipated in the final quarter of 2024. The RBA’s preferred inflation gauge, the Trimmed Mean CPI, was up 0.5% in the quarter, below the anticipated 0.6%, and the annualized figure hit 3.2%, down from the previous 3.5%. Solid employment growth, on the other hand, weighs negatively on interest rate-cut odds. Annual employment growth strengthened to 3.1% in December from 2.3% in November, the strongest rate since October 2023. Australia is expected to have added 20K new jobs in January after creating 56,3K in December. January employment data, however, will not be available until after the RBA monetary policy announcement. Back in December, the RBA’s decision accompanying the statement showed that “some of the upside risks to inflation appear to have eased and while the…
Filed under: News - @ February 17, 2025 11:23 pm