SYDNEY (Reuters) – Australia’s top central banker said on Thursday that it was still too early to decide on the path for interest rates, adding it needed to be patient as it assesses the economic impact of U.S. trade policies that have upended financial markets.
In a speech in Melbourne, Reserve Bank of Australia (RBA)Governor Michele Bullock warned of a period of market and economic volatility ahead but said Australia’s financial system was well placed to absorb shocks from abroad.
U.S. President Donald Trump enacted a baseline 10% tariff on all imports on Saturday, but held off on his plans to slap much higher levies on its major trading partners after a massive meltdown in stocks and bonds.
Trump, however, ramped up his trade war against China, Australia’s biggest trading partner. Beijing has struck back against Washington on every tariff measure and is now subject to a whopping 125% levy.
“It will take some time to see how all of this plays out and the added unpredictability means we need to be patient as we work through how all of this could affect demand and supply globally,” said Bullock.
Bullock added that she was not seeing the same degree of market impact as previous events like in 2008.
The RBA held interest rates steady at 4.1% last week. It is still waiting for more data to be sure inflation is moving sustainably back to its 2-3% target band, wary that a strong labour market could stoke price pressures.
Swaps imply a quarter-point rate cut from the RBA has been fully priced in for May, with some risk for a large 50-basis-point move. Markets expect a total easing of 115 basis points for all of this year.
“We are mindful of not adding to the uncertainty, and to that end, it’s too early for us to determine what the path will be for interest rates,” Bullock said.
“There are a lot of moving parts,” she added. “Our focus remains on our dual mandate for price stability and full employment.”
(Reporting by Stella Qiu; Editing by Shri Navaratnam)
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