Statement on Monetary Policy – May 2025
In Brief
Inflation has eased further and is in our target range. The unemployment rate is low. However, the global outlook has worsened and is more unpredictable than usual.
What is going on in the economy?
Inflation is in the 2–3 per cent target range.
Inflation is now within the target range as interest rates have slowed demand in some parts of the economy. There are signs that people are being cautious in their spending.
How do we see the economy developing?
The increase in global uncertainty means the outlook for the Australian economy is a bit weaker.
The weaker outlook for economic growth in Australia is partly due to lower global growth. Household spending is also expected to grow more slowly than we previously thought.
The unemployment rate is expected to increase a little this year.
We expect it to stabilise a bit below 4½ per cent, which is low by historical standards.
Inflation is expected to settle at a low and stable rate.
Inflation is expected to settle around the middle of our 2–3 per cent target range. We expect that the CPI measure of inflation will increase for a short period when cost-of-living support measures end.
What did the Monetary Policy Board decide?
At its May meeting, the Board decided to lower the cash rate target to 3.85 per cent.
The Board decided it was appropriate to lower the cash rate because inflation is expected to remain around target. However, the Board remains cautious given uncertainty is high and is ready to respond if needed.