RBA On The Fence Over Future Rate Cuts Amid Trade Uncertainty
The Reserve Bank of Australia was uncertain over the timing of its next interest rate cut, the minutes of its late-March meeting showed on Tuesday, amid heightened caution over global trade and economic disruptions.
The RBA had kept interest rates unchanged at 4.1%, in line with expectations, after a 25 basis point cut earlier this year.
Policymakers expressed caution that increased trade tariffs, especially between the U.S. and China, had implications for inflation and stood to further complicate the global economic outlook.
RBA members were also uncertain as to just how tariff developments will affect the Australian economy.
While they did note a recovery in household consumption and gross domestic product growth, as well as a decline in inflation, RBA policymakers were still uncertain over the trajectory of the Australian economy.
Policymakers still saw risks as two-sided, and that Australian inflation and economic growth could still go either way in the coming months. Australia’s labor market remained tight, and was likely to underpin inflation.
In light of heightened uncertainty, the RBA had decided to keep rates unchanged in March.
“Members judged that it was not appropriate at this stage for monetary policy to react to the potential risks that could move outcomes in either direction,” the RBA minutes said.
Policymakers were seen touting May as an appropriate time to review more changes in monetary policy.
The RBA said that bringing inflation back to its target level remained its biggest priority, and that it wanted to establish that the next decision on rates was not predetermined.
The RBA cut rates by 25 bps in February, its first rate cut since the COVID-19 pandemic in 2020.
The move came amid some cooling in Australian growth and inflation, although the latter still remained relatively high. Analysts expect this trend to allow the RBA limited headroom to cut interest rates further.
Sourrce: Investing.com
