Latest RBA Interest Rate Announcement and History
Tuesday 20th May 2025
At its meeting today, the Board decided to lower the cash rate target by 25 basis points to 3.85 per cent.
Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance. Data on inflation for the March quarter provided further evidence that inflation continues to ease.
Setting aside overseas developments, private domestic demand appears to have been recovering, real household incomes have picked up and there has been an easing in some measures of financial stress.
The Board judged that the risks to inflation have become more balanced. Inflation is in the target band and upside risks appear to have diminished as international developments are expected to weigh on the economy.
The Board will be attentive to the data and the evolving assessment of risks to guide its decisions. In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market. The Board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome.
To view the full statement of Michele Bullock, Governor of the Reserve Bank, please click here.
Why do RBA interest rate decisions matter?
RBA interest rate decisions are the key tool for the RBA to influence the Australian economy. They matter for a number of reasons, and affect people of all ages and circumstances:
Deposit holders (including individuals and businesses) will experience this directly through the interest rates offered by banks. To some extent, this also applies to the cash and defensive assets within super and other accounts.
Borrowers (again, including individuals and businesses) feel the effects through the interest and principal repayments on variable rate loans (and indeed on new fixed rate loans).
Lower interest rates tend to stimulate the economy, by improving cashflow for individuals and businesses with debt, as well as encouraging investment spending and employment. Conversely, higher rates restrict household & corporate budgets and spending, putting the brakes on the economy.
Expectations of economic performance, along with other mechanisms for pricing financial markets, tend to provide a positive environment for growth investments like shares and property, which feature heavily in more investors portfolios including super.