ABC News Daily Alan Kohler on the first rate cut in years
Feb 18, 2025
In a captivating discussion, finance expert Alan Kohler breaks down Australia's first interest rate cut in years, offering insights into the implications for households. He analyzes the economic slowdown and inflation trends, revealing how the Reserve Bank's decisions are influenced by public pressure. Kohler also addresses the ongoing recession perceptions among households and the international monetary policy landscape. Finally, he forecasts future rate projections amidst historically low mortgage rates, providing listeners with a comprehensive understanding of the current financial climate.
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First Rate Cut in Years
- The Reserve Bank of Australia (RBA) has made its first rate cut in nearly three years, lowering it by 0.25% to 4.1%.
- This comes after the longest period of peak interest rates in recent times and follows a historically aggressive rate hiking cycle.
Reasoning Behind the Rate Cut
- The RBA's rate cut is primarily due to inflation falling more than anticipated, exceeding their expectations.
- They believe higher interest rates effectively restricted economic activity, putting downward pressure on inflation.
Trimmed Mean Inflation
- The RBA uses trimmed mean inflation, excluding the highest and lowest 15% of price changes, for a more stable measure.
- Their current trimmed mean inflation forecast for June 2025 is 2.7%, falling within their 2-3% target range.