Melbourne, Australia (AP) – On Tuesday, Australia's central bank lowered its benchmark interest rates to 3.85%, marking the second reduction this year as inflation aligned with target levels.
The Reserve Bank of Australia decreased its cash rate from 4.1%, with the drop from 4.35% noted during the February board meeting, which represented Australia's first rate cut since October 2020.
While rate cuts were anticipated, the projections were adjusted slightly downwards. The US and China reached an agreement last week to retract 90 days of recent tariff increases, revitalizing trade between the globe’s two largest economies.
Bank Governor Michele Bullock stated that inflation had dipped within the board’s target range, citing that “internal developments are expected to exert pressure on the economy.”
She also mentioned that global trade policies are evolving swiftly, introducing “significant uncertainty” in central forecasts.
“Increased uncertainty in the global economy has emerged over the past three months, and financial market volatility has intensified considerably. Although recent tariff announcements have sparked a rebound in financial market valuations, substantial uncertainty persists regarding the ultimate extent of tariffs and potential reactions in other nations,” she explained.
“Geopolitical uncertainties remain prevalent, and these factors are likely to negatively impact global economic activity, particularly if households and businesses postpone spending in anticipation of clearer outlooks,” she added.
Banks modify interest rates to steer inflation towards a target range of 2% to 3%.
In the March quarter, the annual inflation rate settled at 2.4%. The trimmed mean – a preferred inflation metric by banks – indicated an underlying inflation rate of 2.9%.
Moreover, inflation has shown stability at 2.4% over the past three months; however, the underlying figures excluding extremes reached 3.2% in the last quarter of 2024.
Inflation gradually decreased after peaking at 7.8% in the final quarter of 2022.
The unemployment rate fluctuated from 4.0% to 4.1% in the December quarter, showing slight movements between January and March, yet remains relatively low. Economists express concerns that a labor shortage may fuel additional inflation.
Source: apnews.com