Interest rates are down and core inflation is back in the target band, but the language the Reserve Bank is using is still very, very cautious.
In its statement on monetary policy explaining today’s cut, the central bank said lower inflation was a key driver in its decision, but it’s still unsure about the future of the economy.
That’s due to a couple of reasons: Donald Trump’s tariffs, and the local jobs market.
On the former, the RBA says:
“While recent announcements on tariffs have resulted in a rebound in financial market prices, there is still considerable uncertainty about the final scope of the tariffs and policy responses in other countries.
“Geopolitical uncertainties also remain pronounced. These developments are expected to have an adverse effect on global economic activity, particularly if households and firms delay expenditure pending greater clarity on the outlook.
“This has also contributed to a weaker outlook for growth, employment and inflation in Australia.”
Meanwhile, this was its take on unemployment:
“A range of indicators suggest that labour market conditions remain tight. Employment is continuing to grow, measures of labour underutilisation are at relatively low rates and business surveys and liaison suggest that availability of labour is still a constraint for a range of employers.”
In short, the monetary policy board said today’s cut was “appropriate”, but that the central bank is ”nevertheless remains cautious about the outlook”.
