Statement on Monetary Policy – February 2025

Inflation eased over much of 2024.

Both headline and underlying inflation have come down, partly because interest rates are slowing some areas of the economy. Even though inflation has fallen, many households are still under financial pressure. The unemployment rate is still low.

The Australian economy is expected to pick up, but it is unclear what will happen globally.

There are signs of a recovery in household spending as the economy comes back into balance. It is not yet clear how things will evolve globally, so there’s been little change in our forecasts for our major trading partners.

The labour market is expected to remain strong.

The unemployment rate is expected to increase slightly this year but stabilise a little above 4 per cent. The jobs market is strong right now and is expected to be supported by a pick-up in economic growth over the next couple of years.

Underlying inflation is expected to return to the 2–3 per cent target range this year.

Both headline and underlying inflation have eased. But some of the decline in headline is due to temporary cost-of-living assistance and is expected to rise again when this ends. A pick-up in the economy alongside a strong jobs market is expected to keep some pressure on prices.

The outlook for inflation, unemployment and economic growth remains uncertain, with recent data giving mixed signals about the state of the economy. On the global front, new trade policies could lead to slower growth and potentially higher inflation for some countries.

At its February meeting, the Board decided to lower the cash rate target to 4.10 per cent.

There has been good progress on inflation but the Board remains cautious.