Why US Fed rate cuts won't sway the RBA
The Federal Reserve is widely expect to cut interest rates on Thursday morning, but experts say a disconnect between the US and Australia on monetary policy is likely to endure.
In the early hours of Thursday morning (Australian time) the US Federal Reserve is expected to slash its cash rate by up to 50 basis points marking the first cuts since the rate hiking cycle began in 2022. Many more cuts are expected to follow.
In Australia, the picture couldn't be more different. Experts say the Reserve Bank of Australia is going to take much longer to get to the same point as its global counterparts because inflation is proving to be much stickier down under.
CME Group chief economist and managing director Erik Norland told Capital Brief on a visit to local shores this week that he expects the RBA will be “focused mainly on the needs of the Australian economy” and as such won't be strongly influenced by the US rate decision.
Norland says there are a few reasons why Australia is an outlier at the moment. First, the RBA did not increase rates as quickly nor by as much as peer central banks at the height of inflation. In part, he said this was due to the risk of a “mortgage cliff” with many Australians on short-term fixed rates or variable rates while in the US it’s typical to have a long-term fixed rate home loan.
