Bullock Speech: RBA Governor speaks on policy outlook after the interest rate cut

Reserve Bank of Australia (RBA) Governor Michele Bullock is speaking at the press conference, explaining the reason behind lowering the interest rate from a 12-year high of 4.35% to 4.1% for the first time in four years in February.

Bullock is responding to media questions as part of a new reporting format for the central bank that started this year.

Key quotes from the RBA press conference 

Cannot declare victory on inflation yet.

Further rate cuts implied by market not guaranteed.

Rate cut was a difficult decision.

Further cuts will depend on data.

Tariff threats are unpredictable, would be bad for economic activity.

May not have as much room to cut, since we did not hike as far as others.

The decision to cut was consensus.

This section below was published at 03:30 GMT to cover the Reserve Bank of Australia's monetary policy announcements and the initial market reaction.

The Reserve Bank of Australia (RBA) board members decided to lower the Official Cash Rate (OCR) by 25 basis points (bps) from 4.35% to 4.1% following the conclusion of its February policy meeting on Tuesday.

The decision matched the market expectations.

Summary of the RBA monetary policy statement

Inflation and GDP have been softer than expected, labour market stronger.

Domestic financial conditions assessed to be restrictive, rates above neutral.

Wide range of estimates for neutral rate, but some estimates have declined.

Risk we have overestimated extent of excess demand in labor market.

Labour market still tight, but there might be more spare capacity elsewhere than thought.

Q4 trimmed mean inflation softer than expected, some easing in housing and service costs.

Cuts inflation and unemployment forecasts, sees lower household spending but higher public demand.

Forecasts CPI at 2.4% June 2025, 3.2% June 2026, 2.7% June 2027.

Forecasts trimmed mean inflation 2.7% June 2025, 2.7% June 2026, 2,7% June 2027.

Forecasts GDP 2.0% June 2025, 2.3% June 2026, 2.2% June 2027.

Forecasts unemployment 4.2% June 2025, 4.2% June 2026, 4.2% June 2027.

Forecasts wage growth 3.4% June 2025, 3.2% June 2026, 3.1% June 2027.

Forecasts based on technical assumption cash rate at 4.0% June 2025, 3.6% Dec 25, 3.4% June 26.

Despite decline, A$ still close to model estimate based on terms of trade, yield differentials.

US economic policies pose material risks to global outlook this year and next.

Risk that US tariffs leads to noticeable tightening in financial conditionds.

Underlying inflation is moderating

The outlook remains uncertain

Sustainably returning inflation to target is the priority

The board will continue to rely upon the data and the evolving assessment of risks to guide its decisions

Board more confident that inflation is moving sustainably towards the midpoint of the 2–3  per cent target range

Upside risks remain.

Forecasts published today suggest that, if monetary policy is eased too much too soon, disinflation could stall, and inflation would settle above the midpoint of the target range.

There has also been continued subdued growth in private demand and wage pressures have eased.

In removing a little of the policy restrictiveness in its decision today, the board acknowledges that progress has been made but is cautious about the outlook.

Board remains cautious on prospects for further policy easing.

The board’s assessment is that monetary policy has been restrictive and will remain so after this reduction in the cash rate.

Some of the upside risks to inflation appear to have eased and there are signs that disinflation might be occurring a little more quickly than earlier expected. There are nevertheless risks on both sides.

Some recent labour market data have been unexpectedly strong, suggesting that the labour market may be somewhat tighter than previously thought.

AUD/USD reaction to the RBA interest rate decision

The Australian Dollar catches a fresh bids on the RBA’s decision. The AUD/USD pair is adding 0.05% on the day to trade at 0.6360 as of writing.

This section below was published on February 17 at 21:45 GMT as a preview of the Reserve Bank of Australia (RBA) policy announcements.

• The Reserve Bank of Australia is expected to cut the OCR by 25 basis points. 
• Australian core inflation eased in the final quarter of 2024 but remained above the RBA’s target. 
• The Australian Dollar consolidates gains against its American rival ahead of the announcement. 

The Reserve Bank of Australia (RBA) will announce its first monetary policy decision of 2025 on Tuesday, and market participants anticipate the Board will cut the benchmark interest rate by 25 basis points (bps).

Since hiking the Official Cash Rate (OCR) to 4.35% in November 2023, the RBA has maintained it steady at this level, as inflation has remained stubbornly high. As a result, pressure on households and businesses has become a significant concern, with sluggish economic growth taking its toll on policymakers’ decisions. 

Will this be the first of multiple interest rate cuts in Australia?

Indeed, inflation in Australia has given signs of improvement in December, boosting the odds for an interest rate cut in February. 

The latest quarterly Consumer Price Index (CPI) released showed that inflation rose by less than anticipated in the final quarter of 2024. The RBA’s preferred inflation gauge, the Trimmed Mean CPI, was up 0.5% in the quarter, below the anticipated 0.6%, and the annualized figure hit 3.2%, down from the previous 3.5%. 

Solid employment growth, on the other hand, weighs negatively on interest rate-cut odds. Annual employment growth strengthened to 3.1% in December from 2.3% in November, the strongest rate since October 2023. Australia is expected to have added 20K new jobs in January after creating 56,3K in December. January employment data, however, will not be available until after the RBA monetary policy announcement. 

Back in December, the RBA’s decision accompanying the statement showed that “some of the upside risks to inflation appear to have eased and while the level of aggregate demand still appears to be above the economy’s supply capacity, that gap continues to close.” 

However, the Minutes of the meeting released two weeks afterwards included a modest change in the wording. Officials were then “gaining some confidence” that inflation was moving sustainably towards their target of between 2% and 3%. 

RBA Governor Michele Bullock also noted that the Board discussed that upside inflation risks had eased but not gone away, yet an interest rate cut or hike was not on the table. 

Overall, market players anticipate a rate cut, but they do not expect it will be the first of many. On the contrary, the RBA is anticipated to maintain its cautious approach to monetary easing. The current restrictive policy settings would likely be unwound at a slow pace. 

How will the Reserve Bank of Australia decision impact AUD/USD?

Should the RBA announce an expected 25 bps interest rate cut, the Australian Dollar (AUD) may come under selling pressure. However, how weak the AUD could be depends on what policymakers anticipate. If the Board announces an unexpected 50 bps trim or announces more cuts coming in the upcoming meetings, it would be quite bearish for the Aussie.

On the contrary, hints at  spaced interest rate cuts may push the AUD up, as it would be read as a “hawkish cut.” 

RBA Governor Michele Bullock will offer a press conference after the announcement and will have to explain much if the decision diverges from expectations. 

Valeria Bednarik, Chief Analyst at FXStreet, says: “The AUD/USD pair peaked at 0.6373 ahead of the announcement, its highest since mid-December. The pair maintains its technically bullish stance amid broad US Dollar (USD) weakness. The Greenback trades on the back foot ever since financial markets understood US President Donald Trump's fiscal measures pushed the Federal Reserve (Fed) into the hawkish path.”

“In fact, uncertainty over what US tariffs may mean to the Australian economy will likely be part of the RBA’s announcement,” Bednarik added.

“Technically speaking, the AUD/USD pair has scope to extend its advance towards the 0.6470 region, where the pair presents multiple intraday highs and lows from the last few months. To reach such an altitude, the pair first needs to overcome the aforementioned intraday high, which is the immediate resistance level. Interim resistance comes next at 0.6430. A dovish outcome could push the pair through the 0.6300 threshold, with additional slides exposing the 0.6230 price zone.”