Millions of Australians have been dealt an April Fool’s Day joke with Donald Trump blamed for borrowers being denied an interest rate cut during a cost-of-living crisis.
The Reserve Bank left the cash rate on hold at 4.1 per cent on Tuesday, declining to cut rates again like it did in February, this time citing new American import tariffs.
‘On the macroeconomic policy front, recent announcements from the United States on tariffs are having an impact on confidence globally and this would likely be amplified if the scope of tariffs widens, or other countries take retaliatory measures,’ the board said.
The RBA’s latest decision is occurring a day before the US imposes new tariffs on Australian agricultural and pharmaceutical exports, amid fears this will spark a global trade war that could push up inflation again.
‘Geopolitical uncertainties are also pronounced. Inflation, however, could move in either direction,’ it said.
‘Many central banks have eased monetary policy since the start of the year, but they have become increasingly attentive to the evolving risks from recent global policy developments.’
Prime Minister Anthony Albanese also misses out on an election campaign rate cut, with polls showing neither major party is likely to have a majority in the next Parliament.
Headline inflation at 2.4 per cent sits in the middle of the RBA’s 2 to 3 per cent target.
Millions of Australians have been dealt an April Fool’s Day joke with Donald Trump blamed for borrowers being denied an interest rate cut during a cost-of-living crisis
The Reserve Bank left the cash rate on hold at 4.1 per cent on Tuesday, declining to cut rates again like it did in February (pictured is Governor Michele Bullock)
But the RBA is concerned cutting rates too quickly could see inflation shoot up again.
‘The board needs to be confident that this progress will continue so that inflation returns to the midpoint of the target band on a sustainable basis,’ it said.
‘It is therefore cautious about the outlook.’
Financial markets and the major banks are expecting three more rate cuts during the coming year.
But the Reserve Bank on Tuesday tried to downplay expectations of more relief for borrowers.
‘The board is resolute in its determination to sustainably return inflation to target and will do what is necessary to achieve that outcome,’ it said.
The futures market had regarded a rate cut as a 10 per cent chance doing into the Reserve Bank’s two-day meeting.
The RBA met on Monday and Tuesday, a week after the federal government extended its quarterly $75 electricity rebates by another six months to the end of December.
The RBA’s latest decision is occurring a day before the US imposes new tariffs on Australian agricultural and pharmaceutical exports, amid fears this will spark a global trade war that could push up inflation again
Before that announcement, it had feared inflation climbing up to 3.7 per cent by the end of 2025.
Treasury’s Budget paper predicted headline inflation, also known as the consumer price index, climbing to 3 per cent by mid-2026, following the end of those electricity rebates.
