Bullock hushes rate cut expectations

Reserve Bank of Australia (RBA) governor Michele Bullock has calmed market expectations for an interest rate cut in May, saying it is too early for the bank to decide yet.

Bullock noted the extreme market volatility because of US President Donald Trump's tariffs and said the central bank is watching the situation closely.

"Inevitably, there will be a period of uncertainty and adjustment as countries respond to the ongoing tariff announcements by the United States administration," Bullock said.

"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 financial market and economic volatility can be expected to continue as the process unfolds, but she said Australia is managing well.

"We're not currently seeing the same degree of impact as previous market events like in 2008 for example," she said.

"The Australian financial system is strong and well placed to absorb shocks from abroad."

Yesterday, NAB chief economist Sally Auld forecasted a 50bp rate cut in May, citing how much things have changed since the RBA met earlier this month. As a result, NAB also cut its fixed rate mortgages across all loan terms by up to 0.55 percentage points.

IG analysis also found the market was predicting a 30bp cut in May.

Bullock said the RBA is engaging closely with other financial regulators in Australia and other central banks around the world.

"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. A key focus for us is how all this uncertainty is affecting decisions made by households and businesses in Australia," Bullock said.

Bullock said the RBA is working to "build a fuller picture" of the possible impacts as it prepares for the May monetary policy meeting.

"There are a lot of moving parts. 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.

"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."