Reserve Bank of Australia Cuts Interest Rates for the First Time in Four Years Amid Inflation Slowdown Expectations
On Tuesday, February 18, the Reserve Bank of Australia (RBA) decided to cut interest rates for the first time in four years,
lowering the benchmark borrowing rate by 25 basis points from 4.35% to 4.10%.
This move followed nine consecutive meetings of rate stability and aligned with market expectations,
which had anticipated this step amid mounting economic challenges.
Topic
Australia
United Kingdom
Australia
In its monetary policy statement, the RBA outlined its economic outlook for the coming period,
lowering its forecasts for both inflation and unemployment while highlighting continued weak household spending,
despite sustained strong public demand.
According to the projections:
- Inflation is expected to reach 2.4% by June 2025, rise to 3.2% by June 2026, and stabilize at 2.7% by June 2027.
- GDP growth is forecasted to be 2.0% in June 2025, improving to 2.3% in June 2026, and stabilizing at 2.2% by 2027.
- Unemployment is projected to remain steady at 4.2% over the next three years until 2027, while wage growth is expected to gradually decline, reaching 3.4% by June 2025, 3.2% in 2026, and 3.1% in 2027.
These forecasts are based on assumptions regarding interest rates,
with the cash rate expected to be 4.0% in June 2025, decrease to 3.6% by December 2025, and fall further to 3.4% by June 2026.
Despite the rate cut, the RBA noted that the Australian dollar remains close to expected levels,
considering trade conditions and bond yield differentials.
However, economic outlook uncertainty persists, given ongoing global market volatility.
United Kingdom
UK Reports Unexpected Rise in Unemployment Benefit Claims in January Despite Slowing Unemployment Rate
Data released by the UK Office for National Statistics (ONS) on Tuesday morning indicated a deterioration in the UK labor market in January,
as unemployment and wage growth figures for the quarter ending in December fell short of expectations.
According to the report:
- New unemployment benefit claims increased by 22,000 in January, significantly exceeding expectations of 10,000.
This follows a 15,100 decrease in claims in December,
with the previous estimate revised upward from a minor 700-claim increase. - The UK unemployment rate slowed to 4.4% in the three months ending in December,
beating forecasts of a rise to 4.5% and remaining steady at the 4.4% level recorded in the previous quarter ending in November. - Average wages (excluding bonuses) rose by 6.0% year-on-year in the three months ending in December,
surpassing expectations of 5.9% growth.
This follows an upward revision of the November quarter figure from 5.5% to 5.6%.
These figures highlight
ongoing economic pressures on the UK labor market,
with the increase in unemployment benefit claims signaling a weakening employment sector.
However, the slower unemployment rate and improved wage growth may ease recession concerns,
potentially influencing Bank of England’s future monetary policy decisions.
Reserve Bank of Australia Cuts Interest Rates for the First Time