The Reserve Bank of Australia (RBA) has cut the cash rate from to 3.6%, down from 3.85%.
The cash rate is what the RBA charges banks for short-term loans.
It affects how much interest banks charge customers on their loans, for example, mortgages. This is why changes to the cash rate are also referred to as the RBA changing interest rates.
The lower the interest rate, the less expensive it is to borrow money.
Today
The RBA has announced it has decided to lower the cash rate by 25 points to 3.6%. The central bank called the cut “appropriate,” and said it was forecasting inflation to “continue to moderate”.
Despite the decision, the RBA said it “remains cautious about the outlook,” as “uncertainty in the world economy remains elevated.”
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It comes after the RBA’s surprise decision last month, when it kept the cash rate on hold. At the time, the RBA said it needed to “wait for a little more information”.
Inflation
The RBA partly bases its decisions on inflation, which measures the change in the price of goods and services overtime.
The latest data from the Australian Bureau of Statistics shows that inflation fell to 2.1% in the year to June.
This is the lowest annual inflation rate since March 2021. When inflation falls, it does not mean prices are falling — it means they are increasing at a slower rate than before.
It is also within the RBA’s target range for inflation of 2-3%.
