[SYDNEY] Australia’s central bank considered it premature to cut interest rates this month in response to global uncertainty over US tariffs, but would reconsider the outlook at its May meeting.
Minutes of the Reserve Bank of Australia’s (RBA) Apr 1 meeting showed the board saw risks on both sides from US President Donald Trump’s tariff plans and would be watching closely to see how these played out.
“Members judged that it was not appropriate at this stage for monetary policy to react to the potential risks,” the minutes showed. “Members observed that the May meeting would be an opportune time to revisit the monetary policy setting.”
The next meeting of the board is on May 19/20, and financial markets are wagering it will cut its 4.1 per cent cash rate by a quarter point, matching a first easing in February.
Crucial will be data on consumer prices due later this month, which is expected to show core inflation slowed back into the RBA’s long-run target band of 2 to 3 per cent.
However, the minutes showed the board was wary of risking the progress made on inflation by easing “prematurely” and emphasised that a move in May was not “predetermined”.
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Trump’s announcement on “reciprocal” tariffs, which included much higher rates than generally expected, was not made until after the RBA’s April meeting.
Speaking last week, Bullock said it was still too early to decide on the path for interest rates, adding it needed to be patient as it assesses the economic impact of trade policies that have upended financial markets.
Of particular concern were Trump’s 145 per cent tariffs on China, which threatened to curb growth in Australia’s biggest trading partner.
The White House has since announced a pause on tariffs on some electronics and hinted as exceptions for US auto makers. Yet he also threatened tariffs on pharmaceuticals and semiconductors.
Investor confusion at the changing policies has sent global markets reeling in the last two weeks and undermined the confidence of Australian consumers and businesses.
The RBA board also discussed the central bank’s holdings of Australian government debt, built up as part of a massive pandemic-stimulus programme.
The RBA has been running this position down gradually by allowing the debt to mature normally and the board judged there was no reason to alter the current pace. REUTERS
