🇦🇺 Reserve Bank of Australia

The key interest rate of the Reserve Bank of Australia (RBA), known as the cash rate, is the benchmark overnight lending rate that influences borrowing costs across the Australian economy. It is a primary tool of monetary policy used to control inflation, stabilize the currency, and support economic growth. Historically, the RBA’s cash rate reached its highest value of 4.75% around early 2011, reflecting a period of economic recovery following the global financial crisis, where inflationary pressures and robust economic growth prompted a tighter monetary stance. The lowest recorded rate was 0.10%, reached during the COVID-19 pandemic in 2020, when the RBA aggressively cut rates to support the economy amid severe disruptions and uncertainty. These extremes were driven by contrasting economic conditions: the high rate was a response to overheating and inflation risks, while the low rate aimed to stimulate demand and employment during a crisis. Changes in the cash rate significantly impact consumer spending, business investment, and housing markets, while also influencing the Australian dollar’s exchange rate—higher rates tend to strengthen the currency by attracting foreign capital, whereas lower rates can weaken it. Currently, as of early 2025, the RBA maintains a cautious monetary policy stance with the cash rate at 4.75%, slightly reduced from recent highs, aiming to balance easing inflation pressures with concerns over a tight labor market and uncertain economic outlook. The bank signals a data-dependent approach, prepared to adjust rates to ensure inflation returns sustainably to the 2-3% target range while avoiding premature easing that could stall disinflation.