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RBA holds rates at 4.1% but Michele Bullock says room for cuts if global trade war takes toll RBA holds rates at 4.1% but Michele Bullock says room for cuts if global trade war takes toll
(31 minutes later)
Reserve Bank of Australia governor says board did not ‘explicitly’ consider case for a rate cut on Monday and TuesdayReserve Bank of Australia governor says board did not ‘explicitly’ consider case for a rate cut on Monday and Tuesday
The governor of the Reserve Bank of Australia, Michele Bullock, says the central bank is ready and able to cut interest rates if needed to shield the economy from a damaging global trade war.The governor of the Reserve Bank of Australia, Michele Bullock, says the central bank is ready and able to cut interest rates if needed to shield the economy from a damaging global trade war.
Bullock made the comments after the central bank’s monetary policy board held rates at 4.1%, in a decision that was widely expected and clearly telegraphed by Bullock at the previous meeting in February. Bullock made the comments after the central bank’s monetary policy board held rates at 4.1%, in a decision that was widely expected and clearly telegraphed by the governor at the previous meeting in February.
The decision kept the independent central bank on the sidelines amid a hotly contested election campaign, although Bullock firmly rejected any suggestion that politics had swayed the board’s decision.The decision kept the independent central bank on the sidelines amid a hotly contested election campaign, although Bullock firmly rejected any suggestion that politics had swayed the board’s decision.
The board did not “explicitly” consider the case for a rate cut, Bullock said, and with no clear signal from the governor on the path of interest rates, the chief economist at Westpac, Luci Ellis, said “we still think that further cuts are in the offing, with the next one most likely in May”. The board did not “explicitly” consider the case for a rate cut, Bullock said, and with no clear signal from the governor on the path of interest rates, the Westpac chief economist, Luci Ellis, said “we still think that further cuts are in the offing, with the next one most likely in May”.
For their part, financial markets trimmed the chance of a May 17 rate cut from 80% before the meeting, to about 70%, according to Westpac. For their part, financial markets trimmed the chance of a 17 May rate cut from 80% before the meeting to about 70%, according to Westpac.
Bullock at a press conference on Tuesday told reporters that “we’ve come a long way, and it hasn’t been easy, but we have made good progress on bringing inflation down and keeping unemployment low”. Sign up for the Afternoon Update: Election 2025 email newsletter
“This is a good position for the economy to be in as we approach a period of uncertainty, but we have to be careful not to get ahead of ourselves. Inflation pressures remain and cost of living pressures are still very real for many Australians, the board will continue to look at the data to assess if the economy and inflation continue to evolve as expected.” Sign up for the Afternoon Update: Election 2025 email newsletter
As the world waits US president Donald Trump to reveal his reciprocal tariff plan at an event in the White House rose garden on Wednesday (Thursday Australian time), Bullock made it clear that overseas events represented a growing headache for monetary policymakers as they near their goal of taming inflation without a big rise in unemployment. Bullock said at a press conference on Tuesday that “we’ve come a long way and it hasn’t been easy, but we have made good progress on bringing inflation down and keeping unemployment low”.
“This is a good position for the economy to be in as we approach a period of uncertainty, but we have to be careful not to get ahead of ourselves. Inflation pressures remain and cost-of-living pressures are still very real for many Australians. The board will continue to look at the data to assess if the economy and inflation continue to evolve as expected.”
As the world waits for the US president, Donald Trump, to reveal his reciprocal tariff plan at the White House rose garden on Wednesday (Thursday Australian time), Bullock made it clear that overseas events represented a growing headache for monetary policymakers as they near their goal of taming inflation without a big rise in unemployment.
Still, the governor on Tuesday reassured Australians that the country was “well placed” to weather any future storm should tit-for-tat tariffs degenerate into a global trade war.Still, the governor on Tuesday reassured Australians that the country was “well placed” to weather any future storm should tit-for-tat tariffs degenerate into a global trade war.
“The economy is in a reasonable position. Inflation is coming down. Unemployment is still relatively low,” she said.“The economy is in a reasonable position. Inflation is coming down. Unemployment is still relatively low,” she said.
“The second point is that … when we went into the pandemic, interest rates were about 1.5%. They’re now much higher than that. If it turns out that there is a big growth impact in Australia, we do have room to move the [interest] rate to support there.“The second point is that … when we went into the pandemic, interest rates were about 1.5%. They’re now much higher than that. If it turns out that there is a big growth impact in Australia, we do have room to move the [interest] rate to support there.
“Now it does depend on what happens. The exchange rate will also come into play. It’s likely to absorb some of the impact. And it also depends on what’s happening with inflation as well, and that’s a little bit indeterminate.“Now it does depend on what happens. The exchange rate will also come into play. It’s likely to absorb some of the impact. And it also depends on what’s happening with inflation as well, and that’s a little bit indeterminate.
“And the challenging bit might be, if growth slows but inflation kicks up, then we’re in a slightly different world.”“And the challenging bit might be, if growth slows but inflation kicks up, then we’re in a slightly different world.”
Bullock warned that the rising tide of trade protectionism was not a temporary phenomenon - although Trump’s enthusiasm for tariffs was an example of this trend “on steroids”. Sign up to Afternoon Update: Election 2025
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Bullock warned that the rising tide of trade protectionism was not a temporary phenomenon – although Trump’s enthusiasm for tariffs was an example of this trend “on steroids”.
“I don’t think that there’s any sense in which what’s being talked about in the United States is transitory,” she said.“I don’t think that there’s any sense in which what’s being talked about in the United States is transitory,” she said.
“If you look at the direction of world trade policy over the last few years, it’s on steroids now, but the direction has been to less free world trade. That’s the direction things are going. There is going to be some permanence to these sorts of trade restrictions that we’re seeing now.”“If you look at the direction of world trade policy over the last few years, it’s on steroids now, but the direction has been to less free world trade. That’s the direction things are going. There is going to be some permanence to these sorts of trade restrictions that we’re seeing now.”
This month’s meeting, held over Monday and Tuesday, was the first of the newly established monetary policy board. In another first, board members were required to individually vote on whether or not to move rates, although those votes remain secret for now. This month’s meeting, held over Monday and Tuesday, was the first of the newly established monetary policy board. In another first, board members were required to individually vote on whether to move rates, although those votes remain secret for now.
Bullock, however, told reporters that there had been “consensus” at the meeting.Bullock, however, told reporters that there had been “consensus” at the meeting.
The monetary policy board includes the recently appointed Marnie Baker, a former chief executive of Bendigo and Adelaide Bank, and Renee Fry-McKibbin.The monetary policy board includes the recently appointed Marnie Baker, a former chief executive of Bendigo and Adelaide Bank, and Renee Fry-McKibbin.
Fry-McKibbin is an academic economist who led the sweeping RBA review that recommended splitting the existing board into interest rate-setting and governance functions.Fry-McKibbin is an academic economist who led the sweeping RBA review that recommended splitting the existing board into interest rate-setting and governance functions.