The RBA cash rate is now 4.10% after fourteen consecutive months at 4.35%; it's also the first cut since November 2020.
The cut was widely anticipated with market expectations at 90% and economists from all four major banks calling it after the soft Q4 inflation numbers.
However, it won't be a universally popular decision - some economists feel it's too soon considering the tight labour market, low productivity, and underlying inflation still outside of target band.
Governor Michele Bullock acknowledged this in her accompanying statement, but said the board now has enough confidence in the inflation outlook to justify cutting rates.
"There has been continued subdued growth in private demand and wage pressures have eased," she said.
"These factors give the Board more confidence that inflation is moving sustainably towards the midpoint of the 2-3% target range."
A press conference will be held at 3.30pm AEDT for more candid views by the governor and the RBA.
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First of many?
Now monetary policy has began to loosen, attention will now shift to how dramatic the cycle will be.
In the February Statement on Monetary Policy, also released on Tuesday, economic modelling is predicated on the cash rate dropping to 3.6% by the end of 2025.
It's important to note though this is just an assumption that underpins the other predictions rather than any statement on the RBA's intentions.
Ms Bullock stressed the priority remains returning inflation to target, and said the current cash rate is still "restrictive" even after this cut.
"In removing a little of the policy restrictiveness in its decision today, the Board acknowledges that progress has been made, but is cautious about the outlook," she said.
The RBA is now forecasting underlying inflation (excluding goods like fuel and food with volatile prices) will drop to 2.7% by June - within the target band.
As Ms Bullock noted though, risks remain on both sides.
"The Board will continue to rely upon the data and the evolving assessment of risks to guide its decisions...[it] remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome," she concluded.
How have the banks reacted?
The major banks have responded uncharacteristically quickly to the cash rate cut.
Westpac jumped the gun, revealing variable rates will be cut before the decision, while CommBank and NAB did the same within minutes of the announcement.
Keep checking Savings.com.au for the latest updates on when each lender will be officially cutting its rates.
Read more: How the big four banks reacted
Picture from RBA
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