ShareSYDNEY: Australia’s central bank cut its key interest rate Tuesday for the first time in more than four years, but warned global turmoil could derail further easing. The Reserve Bank of Australia cut the cash rate by 0.25 percentage points to 4.10 percent, the first time it has been lowered since November 2020.
It said inflation had “fallen substantially since the peak in 2022”, but that it “remains cautious” about the prospect of further reductions in the future. Notably, the bank pointed to the prospect of “significant” uncertainty abroad. “We cannot declare victory on inflation just yet,” bank governor Michele Bullock told reporters.
“There is also a lot of uncertainty around the global outlook at the moment, and the prospect that policy unpredictably could lead to slower growth.” Australia’s rate cut will come as welcome news for Prime Minister Anthony Albanese, who must face voters in a general election that is due by May 17 at the latest. The left-leaning Labor government has struggled to convince the public it is capable of tackling stubborn cost-of-living pressures. “We know that it won’t fix every challenge we have in our economy or in household budgets, but it will help,” Treasurer Jim Chalmers said.
“This is the soft landing that we have been planning for and preparing for, but we can’t be complacent about the months and years ahead.” Moody’s Analytics economist Harry Murphy Cruise said Australia had “finally joined most of its international peers in cutting interest rates”.
“Reading between the lines, don’t expect more easing any time soon,” he added.
Central banks and stock markets the world over are nervously eyeing the impact of US President Donald Trump’s sweeping trade tariff plan. The US Federal Reserve last week warned of a “highly uncertain” economic outlook unsettled by “trade, immigration and regulatory policies”.
Like most major central banks, Australia swiftly hiked rates in an effort to tame soaring inflation stoked by COVID-19 and the outbreak of war in Ukraine. Inflation has dropped from a peak of 7.8 percent in December 2022 and now sits at 2.4 percent, according to the RBA. Although price pressures have eased, many Australian households remain burdened by the high cost of food, fuel, and housing. — AFP
