The long overdue interest rate cut from the RBA reflects economic conditions that have been evident for some time: weak domestic economic growth, inflation falling back to target, moderate wages growth, a steady easing in labour market conditions, global economics and a starting point that current interest rates are extremely restrictive.

The 25 basis point in the cash rate, to 4.10 per cent, will free up cash flow for those with a mortgage or a business debt and overdraft which, with the normal lag of a few months, will help to support economic growth and jobs.

A single interest rate cut will not by itself spark a material economic pick-up nor spark and material inflation pressures, as the RBA Governor Michele Bullock noted in her press conference. This is why more cuts are still in the pipeline, despite the extreme caution from the RBA about the outlook for monetary policy.

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It would be unusual, unprecedented actually, if this was the only interest rate cut from the RBA.

Suffice to say money markets continue to price in between two and three more rate cuts after today, to be delivered by the early part of 2026.

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Will the RBA cut interest rates again in 2025?

Several more interest rate cuts are needed to ensure a meaningful pick up in economic activity over the medium term, including into 2026.

These cuts are consistent with the inflation target and will keep a lid on the rise in the unemployment rate.

The RBA’s next interest rate decision will be on 1 April.

By then there will be two more monthly inflation outcomes, two more labour force releases, one GDP result and lots of partial economic indicators such building approvals, household spending and consumer and business confidence.

There will be a slew of news from overseas too which could be important for RBA deliberations.

Current market pricing after the first cut has an approximately 10 per cent chance of a further 25 basis point cut on 1 April.

These updated RBA forecasts are for inflation to track around 2.7 per cent target right through the forecast horizon out to 2027.

This is based on its assessment that the labour market is tight, demand pressures remain and segments of the economy are still underpinning some price pressures.