06:34 AM EST, 02/18/2025 (MT Newswires) -- The Reserve Bank of Australia decided to lower the cash rate from 4.35% to 4.10% overnight Monday, as was suggested in the last policy meeting in December and supported by the significant easing of underlying inflation in Q4 2024, said Societe Generale.

The policy statement did acknowledge that the inflation pressures were easing a little more quickly than expected, along with continued subdued growth in private demand and easing of wage pressures. Policymakers were still uncertain about the strength of household consumption recovery and also pointed to the easing of housing cost inflation, wrote the bank in a note to clients.

The RBA has become more confident that inflation is moving sustainably towards the midpoint of the 2%-3% target range, as a consequence Australia's central bank implemented the much-awaited pivot, stated SocGen.

However, policymakers provided quite a few hawkish points to control any 'excessive' anticipation of future rate cuts by market participants, pointed out the bank. The policy statement mentioned the recent surprising strength in the labor market and pointed out that the official forecasts for underlying inflation based on the cash rate implied by financial markets were revised up for Q4 2026.

The statement also mentioned still high growth of unit labor costs with weak productivity growth. The concluding part of the policy statement explicitly said that disinflation could stall and inflation would settle above the midpoint of the target range if policy is eased too much too soon.

The RBA emphasized a caution about the future outlook of monetary policy, which was also echoed many times in Governor Michele Bullock's press conference.

Though the RBA suggested that the market's expectation of year-end policy rate (3.6%) would be too low as it may lead to a relatively high underlying inflation (2.7%) compared with the midpoint of the target range, SocGen will rather focus on the RBA's argument that it will rely upon the data and the evolving assessment of risks to guide the policy decisions.

The bank repeats its base scenario of three more rate cuts with year-end rate of 3.35%, which will also depend on upcoming data.