RBA Cuts Cash Rate Again Amid Global Uncertainty

Highlights:

• RBA cuts cash rate by 25bps to 3.85% amid global uncertainty.
• Economic forecasts for exports, investment, and US activity revised down.
• Inflation within the target band, but the job market remains tight.

The Reserve Bank of Australia (RBA) has lowered the official cash rate by 25 basis points to 3.85%, marking its second cut this year. At the time of writing, this move was in line with widespread expectations among economists and financial markets. The decision reflects growing concerns about the global economic outlook and persistent uncertainties in inflation trends.

Cautious Tone Despite Inflation Improvement

In its statement, the RBA noted that while the risks surrounding inflation have become more balanced, it remains cautious due to lingering uncertainties in both demand and supply. The central bank emphasized its commitment to maintaining price stability and full employment, adding that monetary policy is well-positioned to respond swiftly should international developments threaten Australia’s economic stability.

Weaker Forecasts Across the Board

The RBA also downgraded several key economic forecasts, including projections for exports, business investment, and household consumption. It significantly lowered its expectations for US economic activity, citing geopolitical tensions and the impact of tariff-related disruptions.

Domestic inflation has recently returned to the RBA's target range of 2% to 3%, offering some relief. However, Australia’s labour market remains tight, which continues to influence price pressures. Meanwhile, the US Federal Reserve has chosen to keep its interest rate unchanged, reflecting its own cautious stance.

Market Reaction and What’s Ahead

Financial markets had largely priced in today’s rate cut, following the RBA’s earlier decision in February to ease policy for the first time in nearly five years. RBA Governor Michele Bullock is expected to shed further light on the board’s considerations during a scheduled press conference at 3:30 PM.

The outlook remains uncertain, but the RBA appears ready to act further if global shocks or domestic conditions threaten Australia’s path to stable growth.

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