The Reserve Bank of Australia will not be influenced by recent overseas rate cuts, newly appointed Deputy Governor Andrew Hausen has said, after Canadian and European central bankers cut interest rates this week.
In his first public comments since his appointment to the role in November, Hauser, a former top Bank of England official, said that while other central banks had moved to cut rates before, Australia, like other economies, had faced struggles Similar. to control inflationary pressures.
“We all have the same fundamental challenge, which is that inflation has been persistently declining, particularly service price inflation,” Mr. Hauser said.
The Bank of Canada on Wednesday became the first Group of Seven central bank to provide borrowers with interest rate relief, cutting its overnight rate to 4.75 per cent from 5 per cent after headline inflation fell to 2.7 percent in April.
“In Canada, the case is… quite simple,” Mr. Hauser said.
Newly appointed Reserve Bank deputy governor Andrew Hausen said Australia will not be influenced by recent rate cuts in Canada and the UK.
‘Their interest rates were higher than ours. Their inflation rate is lower than ours and their unemployment rate has increased much more substantially than ours.
“I think if we take that data from Canada and connect it to the Australian context, we might well see a different policy stance.”
On Thursday, the European Central Bank followed suit with a rate cut of its own, lowering its key interest rate by 25 basis points to 3.75 percent, even as recent economic data suggested the eurozone faced a scenario similar to Australia’s. in the form of rigid inflationary prices.
But Hauser said there was no guarantee the ECB would continue cutting rates.
“When I talk as I do to some people on the ECB board, not everyone is sure where rates are going next,” he said.
“So I think they have been interested in starting the rate cut cycle to show that they are independent of the United States.
“But I’m not so sure if that goes much further or where it goes from here.”
Indeed, Europe’s measure of core inflation, which excludes the most volatile food and energy prices, accelerated last month to 2.9 percent, up from 2.7 percent in April.
The RBA is expected to be one of the last central banks to lower interest rates, with money markets not pricing in an easing of monetary policy until May 2025.
Investors are closely watching the widening differences between the world’s major central banks, which are a major driver of moves in stock and currency markets.
Traders are betting that divergence will be limited so far.
While the ECB and the BOC have already taken steps to reduce rates, the BOE and the US Federal Reserve are also expected to ease monetary policy.
However, domestically, the RBA is expected to be one of the last central banks to cut interest rates, with money markets not pricing in an easing of monetary policy until May 2025.
In Australia, core inflation remains elevated than its international peers. In April, monthly inflation excluding volatile items and holiday travel rose to 4.1 percent, up from 4 percent in March.
New data released earlier this week showed the RBA’s aggressive streak of rate hikes over the past two years has slowed economic growth to a near standstill in Australia, diminishing calls from some quarters for Governor Michele Bullock and the RBA board should cut rates sooner than planned to avoid pushing the economy into recession.
GDP figures released on Wednesday showed the economy grew an anemic 0.1 percent in the March quarter, a reading that took annual growth to just 1.1 percent, its weakest annual result since the recession in early 1990s outside of the pandemic.