THE Reserve Bank of Australia has cut the cash rate by 25 basis points, to 3.6pc, after it surprised many by keeping rates on hold last month.

The interest rate cut means that the cash rate has now fallen by 75 basis points since the start of this year, with the RBA saying that underlying inflation is continuing to decline back towards its target “mid-point” of 2-3pc.

In announcing today’s rate cut, the RBA said a reduction in inflation and labour market conditions easing slightly were the main reasons the board thought a rate cut was appropriate.

“The Board nevertheless remains cautious about the outlook, particularly given the heightened level of uncertainty about both aggregate demand and potential supply,” the announcement said.

“It noted that monetary policy is well placed to respond decisively to international developments if they were to have material implications for activity and inflation in Australia.”

More clarity on Trump Tariffs

While the RBA said uncertainty remain in the global, it noted that the resolution of some trade talks with United President Donald Trump and other countries had reduced the uncertainty.

“There is a little more clarity on the scope and scale of US tariffs and policy responses in other countries, suggesting that more extreme outcomes are likely to be avoided,” the announcement said.

“Trade policy developments are nevertheless still expected to have an adverse effect on global economic activity, and there remains a risk that households and firms delay expenditure pending still greater clarity on the outlook. As in May, the forecasts assume that both effects weigh on activity and inflation in Australia for a period.”