Australia's central bank expects underlying inflation to fall faster than previously expected as it downgraded the economic outlook, although a still tight labour market is likely to create some lingering price pressures.

Australia's central bank is cautious about cutting rates further given cost pressures in a hot labour market, but it will respond if inflation slows more quickly than expected, senior officials said on Friday.

The rate cut will provide some relief to borrowers and comes as good news for Prime Minister Anthony Albanese, who is facing a tough election to be held no later than May 17.

Australia's central bank cut interest rates on Tuesday for the first time since the depths of the 2020 pandemic, saying progress had been made on inflation though it was still cautious about the outlook.

Australia’s central bank on Tuesday reduced its benchmark interest rate for the first time since October 2020 as the nation’s inflation cools. The Reserve Bank of Australia reduced the cash rate by a quarter percentage point from 4.

Easing inflation has opened the door for the Reserve Bank of Australia to begin an anticipated brief series of interest rate cuts, starting with a quarter point reduction to 4.10% on Tuesday, according to most economists in a Reuters poll.

Australia’s central bank on Tuesday cut interest rates for the first time in more than four years as inflation pressures began to show signs of easing more quickly than expected. The Reserve Bank of Australia cut its cash rate by 0.

The central bank had held its policy rate steady at 4.35% since November 2023, following an extended period of 13 rate hikes to tame inflation at home.

Australia's central bank needs to see more positive news on inflation before cutting interest rates again, a top central bank official said on Thursday.

Top Reserve Bank officials will front a Senate estimates hearing a day after data showed a rise in underlying inflation, sharpening the focus on interest rates.

The central bank hopes productivity will recover to boost economic growth and help business alleviate cost pressures.

Australias consumer prices dipped in January, offering relief to policymakers aiming to curb inflation. Data from the Australian Bureau of Statistics showed the monthly Consumer Price Index (CPI) fell 0.