Bullish indicating open at $55-$60, IPO prices at $37
Investing.com-- Reserve Bank of Australia Deputy Governor Andrew Hauser said on Wednesday that the central bank’s first interest rate cut in nearly five years was motivated by fears of a global trade war and slowing local growth.
But Hauser also repeated the RBA’s messaging that it was in no hurry to cut interest rates further, and will maintain a data-driven approach to further easing.
Speaking at the Australian Financial Review Business Summit in Sydney, Hauser warned that consumers and investors were growing even more wary about U.S. trade tariffs, especially after President Donald Trump made good on his threats to increase tariffs in recent weeks.
The deputy RBA Governor said that an escalated trade war stood to potentially impact the trade-reliant Australian economy, and could also push up domestic inflation- a scenario the central bank will be closely watching.
“It seems likely that a global trade war, if it begins, would not be good news for Australian activity. But the challenge about what it means for inflation is actually quite difficult,” Hauser said.
He warned that the battle to contain Australian inflation was far from over, especially amid a strong labor market, and that the RBA will have to be cautious with any future easing.
But he also flagged the possibility of rates falling to prevent inflation from undershooting the midpoint of the RBA’s 2% to 3% target range for consumer price index inflation.
“The rate cut in February reduces the risks of inflation undershooting that midpoint, but the Board does not currently share the market’s confidence that a sequence of further cuts will be required,” Hauser said in his prepared remarks for the address.
The RBA cut rates by 25 basis points to 4.10% in February, its first rate cut in nearly five years. The central bank said its cut was motivated largely by some signs of easing Australian inflation.
But the RBA had warned that its February cut did not guarantee future easing- a warning repeated by Hauser, as well as the minutes of the RBA’s meeting released earlier this week.