With the Reserve Bank of Australia trimming the cash rate to 3.85% this month and the Reserve Bank of New Zealand delivering its sixth consecutive cut—lowering its Official Cash Rate to 3.25% on 28 May and signalling more to come—it might seem like the rate-cutting wave is a regional affair.

But make no mistake —Australia and New Zealand are not going it alone. Central banks across the globe are reaching for the clippers as growth cools and post-Covid inflation retreats.

As of 18 June 2025, a chorus of central banks around the globe have also eased monetary policy, each aiming to fire up flagging economies and keep a lid on disinflation. From Europe to Asia and across the Americas, rate cuts are back in vogue as policymakers respond to a slowdown in growth and a cooling in inflation.

Here’s a snapshot of some of the latest movers.

Recent Central bank rate cuts

Country/Region	Central Bank	Latest Rate Cut	New Rate	Date of Cut
Europe	European Central Bank	-0.25%	2.00%	5 June 2025
South Korea	Bank of Korea	-0.25%	2.50%	29 May 2025
India	Reserve Bank of India	-0.50%	5.50%	6 June, 2025
United Kingdom	Bank of England	-0.25%	4.25%	8 May 2025
Canada	Bank of Canada	-0.25%	2.75%	12 March 2025
United States	Federal Reserve	-0.25%	4.25–4.50%	18 December 2024

Purpose of interest rate cuts

According to Craig Betalli, Senior Broker at Raine & Horne’s financial services arm, Our Broker, central banks cut interest rates to stimulate economic growth and support price stability.

“One of the key goals of a rate cut is to boost economic activity,” Craig said. “Falling interest rates make borrowing cheaper for households and businesses, which helps drive consumer sentiment, spending and investment.”

While higher interest rates are used to rein in inflation, Craig says that cutting rates can have the opposite effect—helping to combat low inflation with central banks looking for the ideal “soft landing”.

“Inflation is also an indicator of economic activity and when inflation falls below target—2–3% in Australia—rate cuts can often stimulate demand for goods and services, which boosts economic activity, but this also increases demand and puts upward pressure on prices and inflation goes up again,” Craig Betalli explained.

In an attempt to manage this cycle and prevent inflation from falling below its 2% target[i], the European Central Bank (ECB) cut its cash rate by 25 basis points. The ECB is striving to maintain price stability in the eurozone, a challenging task given the presence of major economies like Germany and France alongside much smaller ones such as Cyprus and Malta. Since last June, the ECB has reduced interest rates seven times[ii].

Lower interest rates also help support employment, said Craig. “By stimulating economic activity, rate cuts can lead to greater business investment and hiring, which helps underpin employment,” he explained.

Craig added that rate cuts can also help manage currency strength. “Lower interest rates often lead to a weaker national currency, which can make exports more competitive globally,” he said.

For real estate, Craig said, “Lower interest rates trim mortgage repayments, making home loans more affordable. This additional borrowing capacity often improves buyers and investors access to finance, which can lead to increased demand and upward movement in property prices.”

Early adopters of rate cuts

The Bank of Canada has kept its policy rate steady at 2.75% in June for a second straight meeting, following a series of early and assertive cuts that set the pace globally[iii]. Meanwhile, trade tensions with the U.S. have eased significantly, and Canada now enjoys the lowest average U.S. tariff rate among major trading partners. According to April data from the U.S. Census Bureau, nearly 90% of American imports from Canada entered duty-free, with an average effective tariff rate of just 2.3%.

On the issue of U.S. tariffs, Federal Reserve Chair Jerome Powell has resisted cutting rates since December. In its latest decision on 18 June, the Fed held its benchmark interest rate steady at 4.25%–4.50%, maintaining the cautious, wait-and-see approach it has adopted in recent months as it monitors the potential impact of new tariff policies.

In New Zealand, further cuts to the Official Cash Rate are on the horizon. However, earlier moves to ease monetary policy have already begun to show promising green shoots of recovery in the real estate market.

Looking ahead in Australia, Craig believes the Reserve Bank has kept interest rates “too high for too long,” putting pressure on small and medium-sized businesses and dampening consumer spending. He anticipates further cuts, noting that “three or four before Christmas” can’t be ruled out.

A lower rate environment could open the door for prospective buyers, particularly upgraders, Craig said. “That said, it’s important to feel reasonably confident that we’re moving into a sustained period of lower interest rates.”

Contact your local Raine & Horne office today to take advantage of the opportunities a lower-rate environment can bring.

[i] https://www.ecb.europa.eu/mopo/strategy/pricestab/html/index.en.html

[ii] https://www.reuters.com/world/europe/euro-zone-inflation-eases-below-ecb-target-supporting-rate-cut-bets-2025-06-03/

[iii] https://www.wealthprofessional.ca/news/industry-news/interest-rate-cuts-may-be-over-says-rbc/389467

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