Australia's Central Bank Makes Historic Rate Cut Amid Cooling Inflation

The Reserve Bank of Australia reduced its interest rate to 4.1%, responding to cooling inflation and maintaining economic stability. The move ends an upward trend and was influenced by a decline in inflation rates and stable employment figures. This decision supports the Albanese government's economic strategy.

Australia's central bank has made a significant adjustment to its economic policy by reducing its benchmark interest rate for the first time since October 2020. This decision comes as the nation's inflation shows signs of cooling.

The Reserve Bank of Australia cut the cash rate by 25 basis points, bringing it down from 4.35% to 4.1%, as declared in its inaugural board meeting of the year.

The move was largely anticipated after the December quarter recorded a minimal inflation rise of 0.2%, amounting to an annual 2.4% for 2024. Notably, inflation had previously soared to 7.8% two years ago, prompting the bank to manage the rate to fit within its target of 2% to 3%.

Australia's employment situation remains robust, with unemployment at near-record lows; it stood at 4% in December, slightly up from November's 3.9%.

This adjustment is favorable for Prime Minister Anthony Albanese's Labor Party, encouraging their economic strategy ahead of elections due by May 17.

(With inputs from agencies.)