- Reserve Bank says bigger 50 basis point cut premature
Aussie borrowers have been told to downplay their expectations of mega rate cuts – despite concerns about Donald Trump’s tariffs.
The Reserve Bank last month cut interest rates by 25 basis points, taking them down to 3.85 per cent for the first time since June 2023.
But the minutes of that May 20 meeting have revealed that while a bigger 50 basis point cut was considered, this was deemed unwise because the effects of American tariffs had yet to be felt.
‘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,’ it said.
‘However, members were not persuaded that the combination of these was sufficient to warrant a 50 basis point reduction at this meeting.’
The Reserve Bank hasn’t cut rates by 50 basis points since May 2012, when the Greek debt crisis was weighing on global growth.
The RBA’s latest meeting minutes were released on Tuesday, just days after Trump doubled tariffs on Australian steel from 25 per cent to 50 per cent.
It noted that earlier US tariffs, including 10 per cent on most Australia exports, were yet to affected the domestic economy.
Aussie borrowers have been told to downplay their expectations of mega rate cuts – despite concerns about Donald Trump ‘s tariffs
‘Members noted the absence of signs in the Australian data to date that global trade policy uncertainty was having a significant negative impact on the economy, and that some plausible adverse scenarios could see upward pressure on inflation,’ the Reserve Bank said.
The futures market is now only expecting a 25 basis point rate cut at the RBA’s next meeting in July, which would be occurring before the release of June quarter inflation data.
Most economists are expecting the next move to be occurring in August, but with another quarter of a percentage point easing.
The Reserve Bank last month cut interest rates by 25 basis points but the minutes of that May 20 meeting have revealed that while a bigger 50 basis point cut was considered (pictured is Governor Michele Bullock)
