RBA governor Bullock says it's too early to make call on rates
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The news: Reserve Bank of Australia governor Michele Bullock has refused to bow to pressure to give guidance on earlier rate cuts.
In a speech to the Chief Executive Women's annual dinner in Melbourne on Thursday night, Bullock said both "financial market and economic volatility" can be expected as the tariff process unfolds.
But she sought to soothe concerns by noting that this is not the same degree of impact as "previous market events like in 2008" in the midst of the global financial crisis, and she emphasised that the Australian financial system is "strong and well placed to absorb shocks from abroad".
"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. Our focus remains on our dual mandate for price stability and full employment," Bullock said.
The context: Economists have been revising their rate cut expectations in recent days on the back of trade turbulence in the US, with many now expecting more cuts sooner. The markets have been eyeing an outsized 50 basis point cut in May and some have been calling for an out-of-cycle meeting to cut rates ahead of the next scheduled board meeting.
Bullock's speech, focused largely on women's economic empowerment, was prefaced with a few paragraphs about the state of the economy.
What they said: "Inevitably, there will be a period of uncertainty and adjustment as countries respond to the ongoing tariff announcements by the United States administration. 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," Bullock said in her speech.
"We are closely monitoring financial market conditions here and overseas – as we always do. We continue to engage closely with our fellow financial regulators in Australia, and our central bank counterparts overseas, sharing information and working together. We are carefully considering several factors including the response of our trading partners, additional counter-responses from the US, the response of our exchange rate, and adjustments in other financial markets," she said.
"A key focus for us is how all this uncertainty is affecting decisions made by households and businesses in Australia."
She said this work would help build a picture of the potential impacts as the RBA prepares for the upcoming 20 May board meeting and rate decision.
"We are bringing all this together to form an objective assessment of what it means for the outlook for domestic activity and inflation here at home," she said.
The source: Reserve Bank governor Michele Bullock speech
