Macro Insights: RBA cuts rate to 4.1%, first cut since November 2020

Welcome to another episode of our Macro Insights series! Today, the RBA made a highly anticipated move, cutting the cash rate by 25bps, bringing it to 4.10% from 4.35%. This marks the first rate cut in over four years after a series of 13 hikes aimed at curbing inflation.

While inflation drivers remain sticky, this rate cut should ease cost-of-living pressures for Aussies, though the full effects will take time to trickle through the economy.

Here’s a quick snapshot of the latest data that influenced today’s decision:

• Inflation: Annual inflation dropped to 2.4% (Q4 2024), but services inflation remains high at 4.3%.
• Labour Market: Unemployment rose to 4%, but 256k jobs were added, reflecting a strong labour market.
• Retail Sales: Consumer spending fell 0.1% in December, signalling easing inflationary pressures.
• GDP: Q3 2024 GDP expanded 0.3%, below expectations.

The sectors most likely to benefit from this cut? Tech, Healthcare, and Real Estate – all poised for relief in a lower-rate environment.