Dec 10 2024: The Reserve Bank of Australia (RBA) signaled its increasing openness to cutting interest rates, though a decision on a potential move as early as February hinges on forthcoming economic data.
At its December meeting, the RBA held the cash rate steady at 4.35% but adopted a less hawkish tone, omitting earlier statements about policy needing to remain restrictive and not ruling out potential actions.
While inflation is easing in line with forecasts, core inflation remains sticky at 3.5%. The Australian dollar fell 0.9% to $0.6380, and bond futures rose as markets priced a 57% probability of a February rate cut.
RBA Governor Michele Bullock noted the board had not discussed a rate cut during the meeting but emphasized a data-dependent approach, highlighting inflation, labor market, and consumption trends as key determinants.
Economists remain divided, with some predicting a possible February cut if economic conditions weaken further. However, others see the bar for February action as high. A recent survey showed business conditions at their weakest since 2020, and consumer spending remains subdued despite government stimulus measures.
The RBA’s shift has raised market hopes, but analysts caution that more clarity on the data is needed before February becomes a certainty.
