Michele Bullock, governor of the Bank of the Reserve of Australia (RBA), speaks during a press conference at the central office of the bank in Sydney, Australia, on April 1, 2025.
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The Central Bank of Australia reduced its policy rate at 25 basic points to the lowest in two years as inflation concerns in the country continue to go back, giving space for the bank to relieve monetary policy.
The Australian Reserve Bank reduced the reference rate to 3.85%, its lowest level since 2023, in line with the expectations of economists surveyed by Reuters.
While the RBA said that the upward risks for inflation had decreased “substantially”, uncertainty about global commercial policy will probably continue to weigh on the economy.
“The main inflation is expected to increase in the second half of 2025, since the subsidies of the temporary government to the homes are not ruled out, before returning around the midpoint of the objective range later in the forecast period,” said the central in a monetary statement.
Australia inflation has been in a bassist trend, with the main inflation figure more recently in a minimum of four years of 2.4% in the first quarter of 2025. The objective range of RBA for inflation is between 2% and 3%.
However, the Central Bank calculated that household consumption can be recovered at a slower pace than previously expected, resulting in moderate growth in general demand and a more clear deterioration in the labor market.
“There is a good possibility that [the RBA] Will reduce rates beyond what we are currently anticipating [in] This cycle, “Abhijit Surya, a senior economist of APAC in Capital Economics, said in a note.
Surya, however, believes that the bank overestimated to what extent is the economy be affected by broad commercial tensions.
The Australian economy has seen a income change, with the most recent GDP reading that shows an interannual expansion of 1.3% in the fourth quarter and marked its first expansion since September 2023.
However, analysts, before the RBA meeting, have highlighted the downward risks for the Australian economy due to global commercial tensions and uncertainty around the national economy.
In a note on May 16, HSBC analysts pointed out that “the global economy and financial markets have had tumultuous times” since the last meeting of the RBA on April 1, including the imposition, and the subsurdic suspension, of the rates of US President Donald Trump. “
Analysts predicted a “modest negative impact of growth” in the country, and said that market clashes are probably slightly deflators for Australia.
This is due to the weakest global growth and the commercial diversion of goods manufactured from China to non -American markets, including Australia.
Carl Ang, a fixed income research analyst at MFS Investment Management, also pointed out in a May 15 note that the downward risks and uncertainty about Australia’s economic perspectives have increased substantially, due to the “day of liberation” and global commercial policies.
This will probably cause a “tangible pivish pivot of the RBA,” he said, predicting that the Central Bank will reach a terminal rate of 3.1% in early 2026.
