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The
Reserve Bank of Australia reduced its cash rate from 4.1%. The
reduction from 4.35% at its February board meeting was
Australia’s first rate cut since October 2020.
The rate cut was anticipated, although expectations had declined
slightly after the United States and China agreed last week to
cut back recent tariff hikes for 90 days, reviving stalled trade
between the world two biggest economies.
Bank Governor Michele Bullock said inflation had fallen to her
board's target band as “internal developments are expected to
weigh on the economy.”
World trade policy was changing rapidly, subjecting central
forecasts to “considerable uncertainty,” she said.
“Uncertainty in the world economy has increased over the past
three months and volatility in financial markets rose sharply
for a time. While recent announcements on tariffs have resulted
in a rebound in financial market prices, there is still
considerable uncertainty about the final scope of the tariffs
and policy responses in other countries,” Bullock said in a
statement.
“Geopolitical uncertainties also remain pronounced. These
developments are expected to have an adverse effect on global
economic activity, particularly if households and firms delay
expenditure pending greater clarity on the outlook,” she added.
The bank adjusts interest rates to steer inflation toward a
target band of between 2% and 3%.
During the March quarter, annual inflation was 2.4%. The trimmed
mean –- a gauge of underlying inflation which is the bank’s
preferred measure –- was 2.9%.
Inflation was also steady at 2.4% in the previous three months.
But the underlying figure, which strips out the smallest and
largest values, was 3.2% in the last quarter of 2024.
Inflation has gradually declined after it peaked at 7.8% in the
last quarter of 2022.
Unemployment inched up to 4.1% in January-March from 4.0% in the
December quarter but remains relatively low. Economists fear a
shortage of workers could fuel further inflation.
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