Australia's central bank has made its first interest rate cut in over four years, aiming to ease cost-of-living pressures while acknowledging the risks posed by global economic instability. The Reserve Bank of Australia lowered the cash rate by 0.25 percentage points to 4.10 percent, citing a substantial decline in inflation but cautioning against declaring victory over rising prices. The move comes as the Australian government faces a general election by May 17th and seeks to demonstrate its ability to manage the economy.
Australia's central bank cut its key interest rate Tuesday for the first time in more than four years, but warned global turmoil could derail further easing. The Reserve Bank of Australia cut the cash rate by 0.25 percentage points to 4.10 per cent, the first time it has been lowered since November 2020. It said inflation had “fallen substantially since the peak in 2022”, but that it “remains cautious” about the prospect of further reductions in the future.
“We cannot declare victory on inflation just yet,” bank governor Michele Bullock told reporters. “There is also a lot of uncertainty around the global outlook at the moment, and the prospect that policy unpredictably could lead to slower growth.” Australia’s rate cut will come as welcome news for Prime Minister Anthony Albanese, who must face voters in a general election that is due by May 17 at the latest. The left-leaning Labor government has struggled to convince the public it is capable of tackling stubborn cost-of-living pressures. “We know that it won’t fix every challenge we have in our economy or in household budgets, but it will help,” Treasurer Jim Chalmers said. “This is the soft landing that we have been planning for and preparing for, but we can’t be complacent about the months and years ahead.” Moody’s Analytics economist Harry Murphy Cruise said Australia had “finally joined most of its international peers in cutting interest rates”. Central banks and stock markets the world over are nervously eyeing the impact of US President Donald Trump’s sweeping trade tariff plan. The US Federal Reserve last week warned of a “highly uncertain” economic outlook unsettled by “trade, immigration and regulatory policies”. Like most major central banks, Australia swiftly hiked rates in an effort to tame soaring inflation stoked by Covid-19 and the outbreak of war in Ukraine. Inflation has dropped from a peak of 7.8 per cent in December 2022 and now sits at 2.4 per cent, according to the RBA. Although price pressures have eased, many Australian households remain burdened by the high cost of food, fuel, and housing.
AUSTRALIA ECONOMY INTEREST RATES INFLATION GLOBAL UNCERTAINTY RESERVE BANK OF AUSTRALIA COST OF LIVING ELECTION
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