RBA Cuts Rates: Here's What You Need to Know – 20th May 2025
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RBA Cuts Rates: Here’s What You Need to Know – 20th May 2025
The Reserve Bank of Australia (RBA) just announced it’s cutting the cash rate by 0.25%, bringing it down from 4.10% to 3.85%.
This move was pretty much expected, and it’s the first time we’ve seen the rate drop below 4% since back in May 2023, when it also sat at 3.85%.
This is the second rate cut we’ve seen this year — the first was in February, also a 0.25% drop — which kicked off what’s now looking like a proper easing cycle.
So why the cut? Well, the March quarter inflation data gave the RBA something to smile about. One of their favourite inflation measures (called the trimmed mean) finally fell back within their 2–3% target range — something that hasn’t happened in over three years.
In their official statement, the RBA said inflation’s been coming down nicely since its peak in 2022. They reckon the rate hikes have been doing their job — slowing things down just enough to bring demand and supply back into balance. Looking ahead, they’re expecting headline inflation to tick up a bit as some temporary factors roll off, but the underlying numbers should sit comfortably around the middle of that 2–3% target range.
That said, they’re not ready to pop the champagne just yet. The RBA also flagged a fair bit of uncertainty still hanging over the global economy. Over the past few months, things have gotten a bit shaky — especially in financial markets. There’s also a bit of confusion around new tariffs and how other countries might respond, and let’s not forget the usual geopolitical tensions.
So, while this rate cut is good news for borrowers, the RBA’s keeping a close eye on how things play out globally before making any bold moves.
Rate cut should bring back more confidence in the market
The broking industry has broadly welcomed the latest rate drop, with Broker.com.au CEO, Matt Board, saying: “Even just over the last 2 weeks, with the expectation of a rate dop, we have seen a big uptick in clients reaching out to us to get access to new funding.
“If lenders pass on the 25-basis point cut in full, we should expect borrowers to be keen to look to further increase exposure for growth – whether that be in business lending or across the property spectrum”.
Commenting further “The RBA’s comments read as though they are acutely aware of global events and policies that are directly impacting local businesses and borrowers.”
“When the February rate cut was announced by the RBA, most lenders quickly passed on the 25-basis point cut in full to their variable rate loan products. If that happens with this cut – which we expect – we could see a bit more heat in property prices. So this is something to keep an eye on”.
“How many more rate cuts can we expect this year? No one has a crystal ball, especially the RBA. So, I think their policy of ‘wait and see’ is the right one. There are still many uncertainties, both locally and internationally, and these factors will determine what happens with rates. Personally, I would expect another 50bps between now and Christmas. But these things are always just a guess, no one knows with certainty”.
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