Interest rates on hold: RBA leaves cash rate at 4.10 per cent

The Reserve Bank of Australia (RBA) has held the cash rate at 4.10 per cent, despite slightly lower monthly inflation figures, dashing the hopes of homeowners needing further relief on their mortgage repayments.

The RBA cut the cash rate in February – for the first time since November 2020 – but economists say they are “unsurprised” by the RBA’s decision and believe a back-to-back cut was never on the cards.

Having patience is key, says Sean Langcake, head of macroeconomic forecasting at BIS Oxford Economics.

“People need to pump the brakes on their expectations for several decisions in a row,” he says. “They’re not about to embark on a series of cuts to ease things.”

The monthly CPI, an indication of inflation, rose by 2.4 per cent in the 12 months to February 2025, well within the RBA’s target range of 2 to 3 per cent. 

Michelle Marquardt, Australian Bureau of Statistics head of prices statistics, says: “Annual CPI inflation was slightly lower in February, after holding steady at 2.5 per cent for the previous two months.”

The trimmed mean inflation – which excludes volatile prices and also factors into the RBA’s decision – came in at  2.7 per cent in February 2025.

“This was down slightly from the 2.8 per cent inflation in January and has remained relatively stable for three months,” says Marquardt.

“The largest contributors to the annual movement were food and non-alcoholic beverages (+3.1 per cent), alcohol and tobacco (+6.7 per cent), and housing (+1.8 per cent).”

Langcake expects inflation to continue its downward trajectory, and says it’s unlikely Trump’s current tariff trade war will impact Australia or the RBA’s future decisions.

“We’re not the ones putting the tariffs on. And we won’t, unless we really lose our minds. So, there’s no inflation there for Australia; if anything, there might be a little bit less inflation.

“These impacts are small compared to what’s going on locally. We send less than 4 per cent of our goods exports to the US. So, the direct relationship there is really small.”

The real debate between economists is the number of cuts the RBA will issue in 2025.

Langcake predicts there will be one cut by December. CBA, NAB and Westpac predict a cut each quarter, and ANZ predicts one in August.

Domain’s chief of research and economics, Dr Nicola Powell, says there will be two cuts.

“They’ll reduce in May, and then they’ll reduce in August, is what my expectation is,” she says.

While there was no rate cut this month, Powell believes the February cut has lifted consumer sentiment in the property market.

“[People] are much more likely to buy and sell property, which is a very big ticket financial commitment, and we’re already starting to see that in our inquiry data,” she says. “Buyer inquiry has lifted.

“I don’t think that’s because all of a sudden we’ve seen a rate cut and it’s been a game changer in borrowing capacities. I think what it has done is help to improve sentiment that we are now going to see rates being reduced, and we are in that loosening cycle.”

Mozo spokesperson Peter Marshall says cash rate cuts are not the only way to reduce mortgage repayments.

“Variable rates are moving all the time,” he says.

“[For] people who wanted to get a bit of a drop in their repayments right now and not have to wait for cuts, there are definitely some options out there that are probably worth looking at.”

“There are some lenders that will just move their loans by five or 10 basis points for no particular reason except that, you know, they want to be a bit more aggressive in the market.

“Particularly over the last month or so, we’ve seen a lot of fixed rates move. Fixed rates are coming down quite rapidly at the moment, and we’re seeing some of the best rates around the 5.29 per cent for two or three years [fixed rate loans].”