On 18 February 2025, the Reserve Bank of Australia lowered its cash rate target to 4.10% and the rate on Exchange Settlement balances to 4%. Its decision reflected greater confidence that inflation was moving towards the midpoint of its 2–3% target range.
Underlying inflation had eased to 3.2% in the December quarter. The board also pointed to subdued private demand and weaker wage pressures. Those developments supported a reduction in borrowing costs after a prolonged period of restrictive monetary policy.
The statement nevertheless warned that labour market conditions were tighter than expected. Productivity remained weak, and the outlook for household spending was uncertain. The board therefore avoided committing to a sequence of further reductions.
This historical decision illustrates the distinction between an initial rate cut and a settled easing path. Businesses planning finance or investment needed to consider the bank’s continuing inflation concerns alongside the immediate change in its policy rate.