FX.co ★ Australia 10-Year Yield Falls After RBA Rate Cut

Australia’s 10-year government bond yield recently declined to approximately 4.25%, after reaching a one-week high. This shift followed the Reserve Bank's decision to reduce its benchmark interest rate by 25 basis points for the third occasion this year, aligning with market predictions. This unanimous decision was influenced by a pronounced reduction in inflation from its peak in 2022, alongside its alignment with the 2–3% target range, and early indications of a softer labour market. Policymakers, however, maintain a stance of caution amid ongoing uncertainties regarding overall demand and potential supply constraints. The RBA has revised its growth forecast downward, attributing it to consistently weak productivity, though it continues to anticipate slower core inflation and a stable labour market. The bank has underscored a prudent approach to easing, opting to act only in response to quarterly inflation figures, which has led investors to anticipate an additional cut in November, with another likely in February. Concurrently, global risk sentiment received a boost after US President Donald Trump decided to extend the tariff truce with China by 90 days, thereby avoiding significant duties on Chinese imports.