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Australia’s central bank on Tuesday cut interest rates for the first time in more than four years as inflation pressures began to show signs of easing more quickly than expected.
The Reserve Bank of Australia cut its cash rate by 0.25 basis points to 4.10 per cent.
The central bank said in a statement, however, that it would retain a restrictive policy due to the strength of the jobs market and an uncertain global economic outlook.
“While today’s policy decision recognises the welcome progress on inflation, the board remains cautious on prospects for further policy easing,” the RBA said, noting that other central banks, including the US Federal Reserve, have become more cautious about cutting rates in recent months.
The central bank has been under pressure to begin easing, with some economists warning that its restrictive monetary policy could push the country into recession due to the strain of higher borrowing costs on mortgage holders.
Australia is due to hold an election by mid-May, but Prime Minister Anthony Albanese has yet to set a date as the government has battled high costs of living. Political strategists had seen a rate cut as a critical moment ahead of the polls.
Australia’s Treasurer, Jim Chalmers, welcomed the move as “the rate relief Australians need and deserve”, but added that it was not yet “mission accomplished”.
“It won’t solve every problem in our economy or in household budgets but it will help,” he said.
Economists had pencilled in the long-awaited cut — the RBA’s first since November 2020 — after official data released last month showed inflation fell to 2.4 per cent in the December quarter, giving the central bank more assurance to ease monetary policy.
The cut on Tuesday partly reversed the run of 13 rate rises since May 2022, but came as other major central banks, notably the Fed, have pivoted to a more hawkish stance as inflation has persisted.
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