SYDNEY- Australia’s central bank cut interest rates on Tuesday for the first time since the depths of the 2020 pandemic, saying progress had been made on inflation though it was still cautious about prospects of further policy easing.
The first rate cut will provide some relief to borrowers and comes as good news for Prime Minister Anthony Albanese, who is facing a tough election to be held no later than May 17. Speculation is swirling that he may use the opportunity to call an early election.
Markets had wagered heavily on a quarter-point cut after core inflation surprised on the downside in the fourth quarter at 3.2 percent. But the cautious stance sent the Australian dollar 0.2 percent higher to $0.6366.
Swaps imply just a 20 percent probability for a follow-up cut in April, although a move in May is still almost fully priced in.
Wrapping up its February policy meeting, the Reserve Bank of Australia (RBA) cut the cash rate by a quarter-point to 4.1 percent, the first reduction since November 2020 when the pandemic crisis saw rates slashed to an all-time low of 0.1 percent.
