Reserve Bank of Australia
- Measures of global trade uncertainty are at 50-year highs.
- Risk for Australia would be if US tariffs triggered a global trade war.
- Markets realising that trade uncertainty could see firms and households batten down the hatches.
- Such ‘watchful waiting’ could prove economically damaging in aggregate.
- Possibility of such an effect played a part in the RBA's February rate cut.
- February rate cut reduced the risks of inflation undershooting the 2.5% target.
- Board does not currently share market confidence that a sequence of further rate cuts will be required.
- Progress on inflation has been good, but too soon to declare victory.
- Judge that labour market conditions will remain relatively tight over forecast period.
- Recognise risk we have overestimated tightness of labour market.
Hauser is being careful here. I read between the lines here that if the **** hits the fan on the hit to global trade the RBA will quickly move to further rate cuts. The chaos being fed into markets by Trump will take a toll on business confidence and yeah, a "batten down the hatches" will hit employment across the globe. Precarious times indeed.
