Are Trump's policies keeping the RBA cautious?
The Reserve Bank of Australia (RBA) may hold off on cutting interest rates as global economic uncertainty, fuelled by US President Donald Trump’s policies, creates additional pressure on the Australian dollar, according to a finance brokerage.
Mark Stevenson (pictured above), managing director of Bell Partners Finance, said that while financial markets have been widely anticipating a cash rate reduction from the current 4.35% next week, geopolitical and economic risks could prompt the central bank to delay any move. The RBA has kept rates unchanged since November 2023.
“I’d actually like to see them hold out for maybe one more meeting,” Stevenson said. “The impact of Donald Trump and his trade war with plans to lift tariffs puts pressure on the Australian dollar and that will weigh on the RBA’s decision and its long-running battle to contain inflation.
“The unpredictability of Trump has been evident since he was sworn in just a few weeks ago. The RBA board could wait until its March 31 to April 1 meetings to further examine the global economic headwinds and how they impact on inflation. Who knows what else could come from Trump in the weeks ahead after his latest bombshell plan for the US to take over Gaza?”
While inflation has been easing, Stevenson noted that the RBA will also need to consider domestic factors such as government spending aimed at easing cost-of-living pressures.
“It’s still a pretty close call for the RBA,” he said. “They are under a lot of pressure to lower the cash rate, but they would be justified in staying on hold.”
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