RBA opens door to May rate cut

The Reserve Bank of Australia (RBA) board has indicated it is open to the consideration of an interest rate cut in May, as US President Donald Trump's tariffs place risks on the global economy.

The RBA board minutes from the April meeting acknowledged that the market was pricing in a number of rate cuts before the end of the year.

"Members noted that market pricing at the time was for further cuts in the cash rate totalling 50-75 basis points by the end of 2025 - with little-to-no probability of a cut at the present meeting (April 1) and around a 65% probability of a cut in May," the minutes said.

"The cash rate path expected by market economists was a little higher than that reflected in market pricing. Members discussed possible explanations for this, including that market pricing incorporated some probability of very adverse outcomes associated with a marked escalation in trade tensions."

The bord noted that while there was a "significant rise" in uncertainty about global trade policy, the effect on sentiment and economic developments in Australia was not yet clear.

"Members turned their discussion to the risks that were most prominent in their thinking about the economic outlook, and the relative importance of these," the minutes said.

"They agreed that the risks to the outlook were two-sided, with some that could result in economic activity and inflation in Australia being weaker than expected and others that could result in economic activity and inflation strengthening more noticeably."

Looking forward to the next meeting, the board said it remaining alert to the evolving risks and data being released between the April 1 meeting and the May 20 meeting would carry significant weight to their decision making.

"Members observed that the May meeting would be an opportune time to revisit the monetary policy setting with the benefit of additional data about inflation, wages, the labour market and trends in economic activity, along with a fresh set of economic forecasts and further information about the likely evolution of global trade policies. Collectively, this information would have a considerable bearing on their decision," it said.