RBA announces its hotly anticipated February cash rate

The Reserve Bank of Australia (RBA) has announced a 0.25% cut to the cash rate, bringing it down to 4.10%.

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This decision comes with the RBA gaining increased confidence in the trajectory of inflation towards its target range. The latest CPI data shows inflation moving closer to the 2-3% target, but economic growth has slowed, particularly in retail and construction. Rising unemployment and weak consumer spending have led the RBA to ease monetary policy.

A spokesperson for TorFX, Homely’s preferred currency transfer partner, said the rate had been at 4.35% since November 7, 2023, and Australia was now the last major western economy to lower rates. The four major Australian banks predicted a rate drop, and the ASX30 Interbank Cash Rate Futures contract for February 2025 indicated a 90% expectation of a 25 basis point interest rate cut, up from January 2025, where the expectation was 73%.

Despite inflation easing to 2.4%, the RBA still remains focused on price stability and sustainable growth.

Shane Petros, CEO of Australian Finance Hub, commented on the move: “This rate cut signals a shift in economic conditions after 5 consecutive years of rate stagnation and rises. The relief is welcomed by home owners and borrowers and brings more confidence into the property market. For those with a mortgage, it’s an opportunity to either reduce your repayments or pay off your loan faster. For buyers, it could mean increased competition, so being finance-ready is key.”

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What this means for you

1. The reduction in the cash rate is expected to lower borrowing costs, potentially stimulating the housing market. Home loan interest rates are likely to decrease, offering mortgage holders some relief after a prolonged period of high repayments.
2. Additionally, first-home buyers and investors may find it more feasible to enter the market as financing conditions continue to improve.

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Future outlook

The decision to cut rates aligns with global trends, as central banks in major economies, including the United States, consider easing monetary policy. The US Federal Reserve is expected to reduce rates in the coming months, which could further influence Australia’s economic landscape.

While the RBA’s decision provides immediate relief, future rate movements will depend on inflation trends, employment data, and global economic conditions. Analysts anticipate the possibility of further cuts if economic growth remains sluggish.

For homeowners and buyers, now may be an opportune time to review mortgage options and consider refinancing.

As the economy adjusts to this policy shift, financial markets and consumers alike will be watching closely for the RBA’s next move. Stay informed with the latest finance news and insights on the Homely blog.