Banks follow as RBA cuts rates to 4.1%; Chalmers hails 'soft landing'
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More news: ANZ and National Australia Bank have followed big four rivals Commonwealth Bank and Westpac in reducing their home loan interest rates following the Reserve Bank's decision to decrease the official cash rate today.
All four banks will decrease their variable home loan interest rates by 0.25%, in line with the RBA cut.
The changes by ANZ and NAB will come into effect from 28 February.
What they said: ANZ group executive for Australia retail, Maile Carnegie, said: "The Reserve Bank’s decision to reduce the cash rate is an important step for our economy and will be welcome news for our borrower customers, providing some long-awaited relief from cost of living pressures."
NAB group executive for personal bank, Ana Marinkovic, said: "We are very pleased to deliver this rate cut to home loan customers – we understand how tough it’s been for many Australians.
"The extended period of high interest rates has placed real strain on household budgets and this rate reduction will help to ease the financial burden.
"We wanted to move quickly after the RBA’s decision to provide customers with certainty."
RBA rate cut is 'the soft landing we have been planning for': Treasurer Jim Chalmers
More news: Treasurer Jim Chalmers hailed the Reserve Bank's 25-basis-point cash rate cut as "the soft landing we have been planning for and preparing for" and said today’s decision provides "confidence that the worst of the inflation challenge is behind us".
What they said: "Inflation is now almost a third of the 6.1 per cent we inherited, and that’s a testament to the efforts of all Australians," Chalmers said in a statement.
"Today’s decision is welcome but it’s not mission accomplished because people are still under pressure," he said.
Elsewhere, Saxo chief investment strategist Charu Chanana said: "While disinflation trends have allowed the RBA to start its rate cut cycle, there is still caution on the pace of easing given the tight labour market.
"The market has been quick to adjust, with one rate cut already pushed out from the RBA expectations curve for this year and only one further rate cut now expected."
Monash University professor of econometrics and business statistics Robert Brooks said: "While the RBA is right to cut rates based on the available economic data, the likely impact of tariffs imposed by the US will be to increase inflation and the economic policy uncertainty associated with policy settings, which potentially also increases the risk premium, both of which contribute to increasing US long term bond yields."
CBA and Westpac cut home loan interest rates after RBA decision
More news: Big four lenders Commonwealth Bank and Westpac have announced interest rate reductions after the Reserve Bank cut rates for the first time since November 2020.
CBA and Westpac will both decrease variable home loan interest rates by 0.25% per year for home loan customers, in line with the RBA reduction.
CBA’s change will take effect from 28 February, while Westpac’s will apply from 4 March.
What they said: "We know that cash rate increases have been challenging for our home loan customers and they are looking forward to some relief," said CBA’s group executive for retail banking services, Angus Sullivan.
“We are committed to ensuring our customers have the right tools, support and advice as they navigate this change."
Westpac's consumer chief executive Jason Yetton said: "By reducing the standard variable home loan rate by 0.25 per cent per annum, customers will save an extra $90 per month, or $1,080 per year, based on a $500,000 home loan with principal and interest repayments."
Reserve Bank cuts rates to 4.1%
The news: The Reserve Bank has cut interest rates to 4.10% from 4.35% at its first meeting of 2025.
The decision was widely expected by economists and the markets following better-than-expected inflation data and a shift in tone from the RBA at its December meeting.
The numbers: The Reserve Bank had increased rates 13 times since May 2022, from a low of 0.1% during the pandemic, to grapple with high inflation.
Of these increases, 12 have been under the Albanese government.
The consumer price index rose 0.2% in the December 2024 quarter, with CPI inflation at 2.4% over that period. That was down from 2.8% in the September quarter. The trimmed mean figure, which the RBA is more focused on as it cuts out volatility and temporary government cost-of-living relief, was 3.2%, down from 3.6% in the prior quarter. The RBA’s target band is 2% to 3%.
The RBA has previously said it does not need to be firmly back in the band on the quarterly data to hit the button on easing, but it needs to have a high degree of confidence that inflation is returning sustainably to target.
The context: This Reserve Bank decision has been considered critical for the timing of the upcoming federal election. Economists and political strategists see it as broadly desirable for the Labor government to secure a cut ahead of calling an election.
Economists expect the RBA to remain on hold at its next meeting, on 1 April, with little additional data due to be published before then in terms of inflation.
What they said: “Underlying inflation in year-ended terms is expected to return to the 2% to 3% range earlier than previously expected, but to settle a little above the November forecast if the cash rate follows the market path,” the Reserve Bank said in its Statement on Monetary policy, released alongside the rates decision.
“We have taken some signal in the near term from the weaker-than-expected December quarter inflation outcome, which may indicate more spare capacity in parts of the economy than previously judged (such as in new housing construction).
“However, the central forecast is now for year-ended underlying inflation to be a bit above the midpoint … from late 2025 onwards, rather than for inflation to gradually moderate to the midpoint as was forecast in November.”
The sources: Reserve Bank board statement, Westpac media release, CBA media release, Saxo media release, Monash University media release, NAB media release, ANZ media release
