Latest news with #StatementonMonetaryPolicy
Perth Now
5 days ago
- Business
- Perth Now
Why the RBA opted for smaller rate cut
Global uncertainty on the back of the US President Donald Trump's tariff policy and a weakening Australian economy saw the Reserve Bank of Australia debate an outsized rate cut last month. Minutes from the RBA's May 20 policy meeting show the central bank is still nervous about the impact of Mr Trump's trade policy but wants to move 'cautiously and predictably' in line with market expectations. As such, households were not given an outsized 'insurance against global growth' 50 basis point rate cut. Instead, the bank highlighted the need for monetary policy settings to remain 'predictable at a time of heightened uncertainty'. RBA governor Michele Bullock speaking about the May interest rate cut. NewsWire / Nikki Short Credit: News Corp Australia 'They agreed that developments in the domestic economy on their own justified a reduction in the cash rate target and that the case for that action was strengthened by developments in global trade policy,' the minutes reveal. Ultimately though, the board agreed the case for a 25 basis point rate cut was 'the stronger one' as members were not persuaded that weakening global growth and domestic factors warranted an outsized rate cut. In a silver lining for households, should the impacts of global uncertainty materialise, the RBA board agreed it would need to move to 'expansionary settings' meaning there would be more cuts to the cash rate. The board judged in May however that there was not enough data around the impacts of any global uncertainty to switch to a more expansive monetary policy setting. 'They also judged it was not yet time to move monetary policy to an expansionary stance, taking account of the range of estimates involved, given that inflation was yet to return sustainably to the midpoint of the target range and the staff's assessment that the labour market was still tight,' the minutes read. The RBA board confirmed they have further room to cut rates NewsWire / Nicholas Eagar Credit: NewsWire The board also highlighted they had the firepower left to kickstart global growth should the worst of global uncertainty impact the local economy. 'In finalising the policy statement, members agreed that it was appropriate to convey their commitment to both of the Board's objectives,' the board said. 'They also agreed to convey that policy was well placed to respond decisively to international developments if they were to have material implications for activity and inflation of the kind described in the severe downside scenario set out in the May Statement on Monetary Policy.' Meeting for the second time under its new dual-board structure, the RBA cut the national cash rate by 25 basis points, from 4.10 to 3.85 per cent, but RBA governor Michele Bullock revealed a 50 basis point cut had been debated. 'There was an argument and we did debate it (a 50 basis point cut) but it wasn't the strongest argument in the room,' Ms Bullock said at the time. Unemployment Figures She stressed 'inflation hurts everyone', particularly those on lower incomes and renters. Responding to a question from NewsWire on whether households could expect further relief, and what message she had for those doing it tough, she acknowledged Australians had gone through a 'really rough few years', accentuated by sharp rises in everyday prices. 'I would say that bringing inflation down is the best thing we can do to help them, while keeping employment strong,' she said. 'At the moment we are on track to deliver that. I know you're doing it tough, but conditions are improving.'
West Australian
5 days ago
- Business
- West Australian
‘Not time': Why the RBA took a cautious approach to rate cuts
Global uncertainty on the back of the US President Donald Trump's tariff policy and a weakening Australian economy saw the Reserve Bank of Australia debate an outsized rate cut last month. Minutes from the RBA's May 20 policy meeting show the central bank is still nervous about the impact of Mr Trump's trade policy but wants to move 'cautiously and predictably' in line with market expectations. As such, households were not given an outsized 'insurance against global growth' 50 basis point rate cut. Instead, the bank highlighted the need for monetary policy settings to remain 'predictable at a time of heightened uncertainty'. 'They agreed that developments in the domestic economy on their own justified a reduction in the cash rate target and that the case for that action was strengthened by developments in global trade policy,' the minutes reveal. Ultimately though, the board agreed the case for a 25 basis point rate cut was 'the stronger one' as members were not persuaded that weakening global growth and domestic factors warranted an outsized rate cut. In a silver lining for households, should the impacts of global uncertainty materialise, the RBA board agreed it would need to move to 'expansionary settings' meaning there would be more cuts to the cash rate. The board judged in May however that there was not enough data around the impacts of any global uncertainty to switch to a more expansive monetary policy setting. 'They also judged it was not yet time to move monetary policy to an expansionary stance, taking account of the range of estimates involved, given that inflation was yet to return sustainably to the midpoint of the target range and the staff's assessment that the labour market was still tight,' the minutes read. The board also highlighted they had the firepower left to kickstart global growth should the worst of global uncertainty impact the local economy. 'In finalising the policy statement, members agreed that it was appropriate to convey their commitment to both of the Board's objectives,' the board said. 'They also agreed to convey that policy was well placed to respond decisively to international developments if they were to have material implications for activity and inflation of the kind described in the severe downside scenario set out in the May Statement on Monetary Policy.' Meeting for the second time under its new dual-board structure, the RBA cut the national cash rate by 25 basis points, from 4.10 to 3.85 per cent, but RBA governor Michele Bullock revealed a 50 basis point cut had been debated. 'There was an argument and we did debate it (a 50 basis point cut) but it wasn't the strongest argument in the room,' Ms Bullock said at the time. Unemployment Figures She stressed 'inflation hurts everyone', particularly those on lower incomes and renters. Responding to a question from NewsWire on whether households could expect further relief, and what message she had for those doing it tough, she acknowledged Australians had gone through a 'really rough few years', accentuated by sharp rises in everyday prices. 'I would say that bringing inflation down is the best thing we can do to help them, while keeping employment strong,' she said. 'At the moment we are on track to deliver that. I know you're doing it tough, but conditions are improving.'
Yahoo
5 days ago
- Business
- Yahoo
Australia central bank says higher US tariffs a drag on global economy
SYDNEY (Reuters) -Australia's central bank said on Tuesday that higher U.S. tariffs would drag on the global economy and put near-term downward pressures on prices of traded goods, though the exact impact is hard to assess given the policy uncertainties. In a speech in Brisbane, Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter said the central bank will closely monitor how trade policies evolve globally, with the higher uncertainty expected to lead to declines in investment, output and employment. "But the unpredictability and unprecedented nature of the current situation makes it hard to be precise on the size of the impact," said Hunter. "Going forward we will be monitoring carefully which assumption is closest to how things unfold." The expected hit to Australia's economy and the labour market was one reason that the RBA cut interest rates to a two-year low of 3.85% last month and opened the door to more policy easing in the months ahead. It also considered a severe downside scenario for global trade and a trade peace scenario where tariffs would be rolled back. "Benchmarking against the scenarios in the May SMP (Statement on Monetary Policy) will help us identify the scenario that best reflects current conditions and the outlook, enabling the Board to adjust policy settings accordingly," said Hunter. The RBA also judged the tariffs would be disinflationary for Australia as Chinese producers, in the face of higher U.S. tariffs, try to redirect their products to other markets. "For countries that are not imposing higher tariffs, such as Australia, this could flow into import prices, making products cheaper and lowering inflation," said Hunter. Headline consumer price inflation held at 2.4% in the first quarter and a key trimmed mean measure of core inflation slowed to 2.9%, taking it back into the RBA's target band of 2% to 3% for the first time since late 2021. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
5 days ago
- Business
- Yahoo
Why the RBA opted for smaller rate cut
Global uncertainty on the back of the US President Donald Trump's tariff policy and a weakening Australian economy saw the Reserve Bank of Australia debate an outsized rate cut last month. Minutes from the RBA's May 20 policy meeting show the central bank is still nervous about the impact of Mr Trump's trade policy but wants to move 'cautiously and predictably' in line with market expectations. As such, households were not given an outsized 'insurance against global growth' 50 basis point rate cut. Instead, the bank highlighted the need for monetary policy settings to remain 'predictable at a time of heightened uncertainty'. 'They agreed that developments in the domestic economy on their own justified a reduction in the cash rate target and that the case for that action was strengthened by developments in global trade policy,' the minutes reveal. Ultimately though, the board agreed the case for a 25 basis point rate cut was 'the stronger one' as members were not persuaded that weakening global growth and domestic factors warranted an outsized rate cut. In a silver lining for households, should the impacts of global uncertainty materialise, the RBA board agreed it would need to move to 'expansionary settings' meaning there would be more cuts to the cash rate. The board judged in May however that there was not enough data around the impacts of any global uncertainty to switch to a more expansive monetary policy setting. 'They also judged it was not yet time to move monetary policy to an expansionary stance, taking account of the range of estimates involved, given that inflation was yet to return sustainably to the midpoint of the target range and the staff's assessment that the labour market was still tight,' the minutes read. The board also highlighted they had the firepower left to kickstart global growth should the worst of global uncertainty impact the local economy. 'In finalising the policy statement, members agreed that it was appropriate to convey their commitment to both of the Board's objectives,' the board said. 'They also agreed to convey that policy was well placed to respond decisively to international developments if they were to have material implications for activity and inflation of the kind described in the severe downside scenario set out in the May Statement on Monetary Policy.' Meeting for the second time under its new dual-board structure, the RBA cut the national cash rate by 25 basis points, from 4.10 to 3.85 per cent, but RBA governor Michele Bullock revealed a 50 basis point cut had been debated. 'There was an argument and we did debate it (a 50 basis point cut) but it wasn't the strongest argument in the room,' Ms Bullock said at the time. She stressed 'inflation hurts everyone', particularly those on lower incomes and renters. Responding to a question from NewsWire on whether households could expect further relief, and what message she had for those doing it tough, she acknowledged Australians had gone through a 'really rough few years', accentuated by sharp rises in everyday prices. 'I would say that bringing inflation down is the best thing we can do to help them, while keeping employment strong,' she said. 'At the moment we are on track to deliver that. I know you're doing it tough, but conditions are improving.' Error in retrieving data Sign in to access your portfolio Error in retrieving data
The Advertiser
20-05-2025
- Business
- The Advertiser
Borrowers rejoice as rates cut amid 'uncertain' times
A "dovish" Reserve Bank has cut interest rates to their lowest level in two years and raised hopes of more mortgage relief on the way for borrowers. Fears over what Donald Trump's tariffs could do to the Australian economy dominated the RBA board's decision to cut the official cash rate by a quarter of a percentage point to 3.85 per cent on Tuesday. Australia's major banks immediately passed on the cut to variable rate mortgage holders, saving the average borrower about $90 a month. On the domestic front, low unemployment and high wages growth are keeping the RBA on its toes about the risks of inflation reigniting. But with the main inflation measure back in the central bank's target range of two to three per cent, it's no longer the burning concern it once was. "Price increases have slowed and it's fairly broadly based, and this is very good news," governor Michele Bullock said in her post-meeting press conference. "We think this is the right decision at this point in time. Where this leads us in the future is a little more uncertain." Domestic considerations were overpowered by the global trade storm brewing overseas. The board noted upside risks to inflation appeared to have diminished "as international developments are expected to weigh on the economy", in a more dovish post-meeting statement than April, noted NAB economists Sally Auld and Taylor Nugent. "With inflation expected to remain around target, the board therefore judged that an easing in monetary policy at this meeting was appropriate," the statement said. The words "uncertainty" or "uncertain" appeared 132 times in the bank's Statement on Monetary Policy, released alongside the board statement. In its quarterly update to its economic forecasts, the RBA lowered its prediction for underlying inflation from 2.7 per cent to 2.6 per cent by the middle of the year. Australia's economy is tipped to grow 0.3 percentage points slower in 2025 at 2.1 per cent, while unemployment is expected to peak 0.1 percentage higher at 4.3 per cent. But Ms Bullock stressed this was only the bank's baseline case. In a more pessimistic scenario war-gamed by RBA staff, Australia's economy would be three per cent - or $80 billion - smaller than it otherwise would have been by mid-2027. "If you look at our scenario analysis, it does suggest that in a really bad outcome there could possibly be a recession," Ms Bullock conceded. With all four big banks announcing they would pass the cut on in full to variable rate mortgage holders, borrowers with a median mortgage of $600,000 will pay about $90 less per month in interest repayments. Treasurer Jim Chalmers said it was welcome relief for millions of Australians. "We are really pleased to see more help is on the way for working families with a mortgage, and that's what this decision today is all about," he told reporters. "Global economic uncertainty is casting a dark shadow over the whole global economy, and we are not immune from that. We're better placed, we're better prepared, but we're not immune from those developments." Money markets and most economists had tipped the cut ahead of the RBA's announcement. Expectations of additional cuts firmed following the announcement. The market was pricing in a better than even chance of another 25 basis point cut at the RBA board's next meeting in July, up from 35 per cent, with up to three cuts expected by year's end. A "dovish" Reserve Bank has cut interest rates to their lowest level in two years and raised hopes of more mortgage relief on the way for borrowers. Fears over what Donald Trump's tariffs could do to the Australian economy dominated the RBA board's decision to cut the official cash rate by a quarter of a percentage point to 3.85 per cent on Tuesday. Australia's major banks immediately passed on the cut to variable rate mortgage holders, saving the average borrower about $90 a month. On the domestic front, low unemployment and high wages growth are keeping the RBA on its toes about the risks of inflation reigniting. But with the main inflation measure back in the central bank's target range of two to three per cent, it's no longer the burning concern it once was. "Price increases have slowed and it's fairly broadly based, and this is very good news," governor Michele Bullock said in her post-meeting press conference. "We think this is the right decision at this point in time. Where this leads us in the future is a little more uncertain." Domestic considerations were overpowered by the global trade storm brewing overseas. The board noted upside risks to inflation appeared to have diminished "as international developments are expected to weigh on the economy", in a more dovish post-meeting statement than April, noted NAB economists Sally Auld and Taylor Nugent. "With inflation expected to remain around target, the board therefore judged that an easing in monetary policy at this meeting was appropriate," the statement said. The words "uncertainty" or "uncertain" appeared 132 times in the bank's Statement on Monetary Policy, released alongside the board statement. In its quarterly update to its economic forecasts, the RBA lowered its prediction for underlying inflation from 2.7 per cent to 2.6 per cent by the middle of the year. Australia's economy is tipped to grow 0.3 percentage points slower in 2025 at 2.1 per cent, while unemployment is expected to peak 0.1 percentage higher at 4.3 per cent. But Ms Bullock stressed this was only the bank's baseline case. In a more pessimistic scenario war-gamed by RBA staff, Australia's economy would be three per cent - or $80 billion - smaller than it otherwise would have been by mid-2027. "If you look at our scenario analysis, it does suggest that in a really bad outcome there could possibly be a recession," Ms Bullock conceded. With all four big banks announcing they would pass the cut on in full to variable rate mortgage holders, borrowers with a median mortgage of $600,000 will pay about $90 less per month in interest repayments. Treasurer Jim Chalmers said it was welcome relief for millions of Australians. "We are really pleased to see more help is on the way for working families with a mortgage, and that's what this decision today is all about," he told reporters. "Global economic uncertainty is casting a dark shadow over the whole global economy, and we are not immune from that. We're better placed, we're better prepared, but we're not immune from those developments." Money markets and most economists had tipped the cut ahead of the RBA's announcement. Expectations of additional cuts firmed following the announcement. The market was pricing in a better than even chance of another 25 basis point cut at the RBA board's next meeting in July, up from 35 per cent, with up to three cuts expected by year's end. A "dovish" Reserve Bank has cut interest rates to their lowest level in two years and raised hopes of more mortgage relief on the way for borrowers. Fears over what Donald Trump's tariffs could do to the Australian economy dominated the RBA board's decision to cut the official cash rate by a quarter of a percentage point to 3.85 per cent on Tuesday. Australia's major banks immediately passed on the cut to variable rate mortgage holders, saving the average borrower about $90 a month. On the domestic front, low unemployment and high wages growth are keeping the RBA on its toes about the risks of inflation reigniting. But with the main inflation measure back in the central bank's target range of two to three per cent, it's no longer the burning concern it once was. "Price increases have slowed and it's fairly broadly based, and this is very good news," governor Michele Bullock said in her post-meeting press conference. "We think this is the right decision at this point in time. Where this leads us in the future is a little more uncertain." Domestic considerations were overpowered by the global trade storm brewing overseas. The board noted upside risks to inflation appeared to have diminished "as international developments are expected to weigh on the economy", in a more dovish post-meeting statement than April, noted NAB economists Sally Auld and Taylor Nugent. "With inflation expected to remain around target, the board therefore judged that an easing in monetary policy at this meeting was appropriate," the statement said. The words "uncertainty" or "uncertain" appeared 132 times in the bank's Statement on Monetary Policy, released alongside the board statement. In its quarterly update to its economic forecasts, the RBA lowered its prediction for underlying inflation from 2.7 per cent to 2.6 per cent by the middle of the year. Australia's economy is tipped to grow 0.3 percentage points slower in 2025 at 2.1 per cent, while unemployment is expected to peak 0.1 percentage higher at 4.3 per cent. But Ms Bullock stressed this was only the bank's baseline case. In a more pessimistic scenario war-gamed by RBA staff, Australia's economy would be three per cent - or $80 billion - smaller than it otherwise would have been by mid-2027. "If you look at our scenario analysis, it does suggest that in a really bad outcome there could possibly be a recession," Ms Bullock conceded. With all four big banks announcing they would pass the cut on in full to variable rate mortgage holders, borrowers with a median mortgage of $600,000 will pay about $90 less per month in interest repayments. Treasurer Jim Chalmers said it was welcome relief for millions of Australians. "We are really pleased to see more help is on the way for working families with a mortgage, and that's what this decision today is all about," he told reporters. "Global economic uncertainty is casting a dark shadow over the whole global economy, and we are not immune from that. We're better placed, we're better prepared, but we're not immune from those developments." Money markets and most economists had tipped the cut ahead of the RBA's announcement. Expectations of additional cuts firmed following the announcement. The market was pricing in a better than even chance of another 25 basis point cut at the RBA board's next meeting in July, up from 35 per cent, with up to three cuts expected by year's end. A "dovish" Reserve Bank has cut interest rates to their lowest level in two years and raised hopes of more mortgage relief on the way for borrowers. Fears over what Donald Trump's tariffs could do to the Australian economy dominated the RBA board's decision to cut the official cash rate by a quarter of a percentage point to 3.85 per cent on Tuesday. Australia's major banks immediately passed on the cut to variable rate mortgage holders, saving the average borrower about $90 a month. On the domestic front, low unemployment and high wages growth are keeping the RBA on its toes about the risks of inflation reigniting. But with the main inflation measure back in the central bank's target range of two to three per cent, it's no longer the burning concern it once was. "Price increases have slowed and it's fairly broadly based, and this is very good news," governor Michele Bullock said in her post-meeting press conference. "We think this is the right decision at this point in time. Where this leads us in the future is a little more uncertain." Domestic considerations were overpowered by the global trade storm brewing overseas. The board noted upside risks to inflation appeared to have diminished "as international developments are expected to weigh on the economy", in a more dovish post-meeting statement than April, noted NAB economists Sally Auld and Taylor Nugent. "With inflation expected to remain around target, the board therefore judged that an easing in monetary policy at this meeting was appropriate," the statement said. The words "uncertainty" or "uncertain" appeared 132 times in the bank's Statement on Monetary Policy, released alongside the board statement. In its quarterly update to its economic forecasts, the RBA lowered its prediction for underlying inflation from 2.7 per cent to 2.6 per cent by the middle of the year. Australia's economy is tipped to grow 0.3 percentage points slower in 2025 at 2.1 per cent, while unemployment is expected to peak 0.1 percentage higher at 4.3 per cent. But Ms Bullock stressed this was only the bank's baseline case. In a more pessimistic scenario war-gamed by RBA staff, Australia's economy would be three per cent - or $80 billion - smaller than it otherwise would have been by mid-2027. "If you look at our scenario analysis, it does suggest that in a really bad outcome there could possibly be a recession," Ms Bullock conceded. With all four big banks announcing they would pass the cut on in full to variable rate mortgage holders, borrowers with a median mortgage of $600,000 will pay about $90 less per month in interest repayments. Treasurer Jim Chalmers said it was welcome relief for millions of Australians. "We are really pleased to see more help is on the way for working families with a mortgage, and that's what this decision today is all about," he told reporters. "Global economic uncertainty is casting a dark shadow over the whole global economy, and we are not immune from that. We're better placed, we're better prepared, but we're not immune from those developments." Money markets and most economists had tipped the cut ahead of the RBA's announcement. Expectations of additional cuts firmed following the announcement. The market was pricing in a better than even chance of another 25 basis point cut at the RBA board's next meeting in July, up from 35 per cent, with up to three cuts expected by year's end.
