RBA cuts rates to 3.60% amid cooling inflation

Daily Currency Update

Overnight, the Australian dollar traded within a narrow range against the US dollar, reflecting a cautious market sentiment ahead of key upcoming economic data. The AUD hovered around US$0.6518, showing minimal movement from the previous day’s close. This modest decline of approximately 0.07% suggests that traders remained in a holding pattern, awaiting guidance from two significant events: the Reserve Bank of Australia’s (RBA) monetary policy outlook and impending US inflation figures. Throughout the session, the AUD/USD pair fluctuated between roughly 0.6515 and 0.6529, indicating low volatility. The muted performance was partly influenced by broader US dollar strength, underpinned by firm Treasury yields and investor expectations that the Federal Reserve will maintain a cautious stance on interest rate cuts. Domestically, softer consumer spending and persistent inflation concerns also weighed on the Aussie dollar. Overall, the AUD remained relatively stable but slightly pressured as markets positioned for potentially market-moving data in the days ahead.

The RBA cut the official cash rate by 25 basis points to 3.60%, marking its third rate reduction this year as it moves away from the aggressive tightening cycle of 2022–2023. The unanimous decision was widely anticipated, supported by recent data showing continued moderation in inflation—headline CPI dropped to 2.1%, comfortably within the central bank’s 2–3% target range, while trimmed mean inflation stood at 2.7%. Concurrently, the labour market showed signs of cooling, with unemployment rising to 4.3% and underemployment increasing. In its statement, the RBA acknowledged that while inflation pressures have eased, overall economic growth remains sluggish, productivity gains are limited, and consumer demand is weak. Governor Michele Bullock emphasized that although the disinflation trend is encouraging, the Bank is not yet declaring victory, and monetary policy will remain “data dependent” moving forward. The RBA also downgraded its GDP growth forecast for 2025 to a modest 1.2%, suggesting that further rate cuts may be warranted if economic conditions deteriorate. While this latest cut provides some relief to households and mortgage holders, it also highlights the fragile state of Australia’s economy amid ongoing global uncertainty and domestic challenges.