RBA: The pace of interest rate cuts remains moderate

■ As expected by the market, the Reserve Bank of Australia (RBA) cut its policy rate again after three months, bringing it to 3.60%, the lowest level in two years.  
■ While lowering its economic growth forecasts, it maintained its May inflation and unemployment forecasts, with further rate cuts likely to come after November.  
 
    On August 12, the Reserve Bank of Australia (RBA) announced during its Board of Governors meeting that it would cut its policy rate by 0.25 percentage points to 3.60%, the lowest level in two years. This was the second rate cut between meetings, following previous cuts in February and May. The statement noted that global economic uncertainty remains high, and US tariffs are expected to impact economic activity and price increases in Australia. Additionally, the effects of monetary easing have been delayed, and there is still uncertainty about how businesses will respond with regard to pricing and wages to factors such as overall demand for goods and services, potential supply, and the labor market. Therefore, the RBA remains cautious and continues to monitor overseas developments and economic indicators. 

 
    The Quarterly Financial Policy Report (SMP) released at the same time showed that GDP growth forecasts have been revised downward every six months through June 2027 but are projected to reach 1.7% by the end of December 2025, 2.1% by December 2026, and a modest rebound to 2.0% by December 2027. Meanwhile, forecasts for the Consumer Price Index (CPI) and unemployment rate remained unchanged from May. The overall CPI is projected to be 3.0% by December 2025, 3.1% by June 2026, 2.9% by December 2026, and 2.6% by June 2027. The RBA's trimmed mean (TM) is expected to stay at 2.6% through June 2027, both above the bank's target range of 2.0-3.0%. 

 
The unemployment rate is expected to stay at a low 4.3% through June 2027. While wage growth has peaked, unit labor cost growth remains high, and the labor market is still tight. The RBA emphasized it will pay close attention to the outlook for inflation and the labor market, with July's employment data being a key indicator of future policy. RBA Governor Bullock stated that if inflation continues to slow as expected, further easing might occur. Since the CPI for July- September will be released in late October, the next Board meeting on September 29-30 is likely to keep the policy rate unchanged, with additional rate cuts probable on November 3-4 or at the last meeting of the year on December 8-9.