Financial markets are now widely expecting a May interest rate cut as a result of Donald Trump’s broad-based tariffs.
The 30-day interbank futures market is now regarding a May 20 rate cut from the Reserve Bank of Australia as an 85 per cent chance.
This would see the cash rate fall to 3.85 per cent for the first time since June 2023, following the RBA’s next board meeting.
Prime Minister Anthony Albanese has confirmed Australia would not retaliate to the 10 per cent tariffs on Australian exports, on top of the 25 per cent tariffs on steel and aluminium.
While the American tariffs could push up inflation, central bankers are more concerned about global trade wars slowing economic growth.
Reserve Bank of Australia Governor Michele Bullock made this point on Tuesday, as the RBA left rates on hold at 4.1 per cent.
‘We do know what to be worried about,’ she told reporters in Sydney.
‘A trade war with escalating tariffs and reciprocal tariffs is going to slow down the growth in world trade and Australia as a small, open economy has benefited massively from open trade.
‘So, it’s not good for us, a world trading system that is fragmenting, that is not good for us.’
Financial markets are now widely expecting a May interest rate cut as a result of Donald Trump ‘s widespread tariffs
