Michele Bullock, governor of the Reserve Bank of Australia (RBA), speaks during a press conference at the bank’s headquarters in Sydney, Australia, Tuesday, April 1, 2025.
Bloomberg | Bloomberg | Getty images
The Central Bank of Australia has reduced its policy rate by 25 basic points to the lowest in two years while inflation problems in the country continue to retreat, giving room for the bank to facilitate monetary policy.
The reserve Bank of Australia reduced the reference rate to 3.85%, its lowest level since May 2023, in accordance with the expectations of economists interviewed by Reuters.
Inflation of Australia was on a downward trend, the most recent inflation figure being a lower over four years of 2.4% in the first quarter of 2025.
The RBA declared in its previous declaration of monetary policy that the return of inflation in a lasting way to its objective between 2% and 3% “within a reasonable time” is its highest priority, although it also recognized that the prospects were uncertain.
The Australian economy has also seen a turnaround, reading the most recent GDP showing a 1.3% expansion in annual shift in the fourth quarter and marking its first expansion since September 2023.
However, analysts, before the RBA meeting, highlighted the risks of decline for the Australian economy due to global trade tensions and uncertainty around the domestic economy.
In a note of May 16, HSBC analysts noted that “the global economy and the financial markets have had tumultuous moments” since the last RBA meeting on April 1, including taxation – and subsequent suspension – prices of the “Liberation Day” of American President Donald Trump.
Analysts have planned a “impact on modest negative growth” on the country and said that market shocks are probably slightly disinfusion to Australia.
This is due to global growth and the lower worldwide diversion of manufactured products from China to non -American markets, including Australia.
Carl Ang, a fixed income research analyst of MFS Investment Management, also noted in a note of May 15 that the risks and uncertainty of the decline in the economic prospects of Australia increased considerably, due to the “liberation day” and global commercial policies.
This will probably encourage a “tangibly dominant pivot of the RBA”, he said, providing that the central bank will reach a terminal rate of 3.1% at the beginning of 2026.
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