Grim call on whether interest rate cuts are coming in Australia after Canada and the UK gave homeowners relief

The Reserve Bank of Australia will not be affected by recent interest rate cuts abroad, newly appointed Deputy Governor Andrew Hausen has indicated, after Canadian and European central bankers cut rates this week.

In his first public comments since being appointed to the role in November, Mr Hauser, who was previously a senior official at the Bank of England, said that while other central banks had previously cut interest rates, Australia, like other economies, with similar had encountered problems. in taming inflationary pressures.

“We all have the same fundamental challenge, which is that inflation has been stubborn on its way down, especially service price inflation,” Mr Hauser said.

The Bank of Canada on Wednesday became the first central bank in the Group of Seven to provide rate cuts for borrowers, cutting the overnight rate to 4.75 per cent from 5 per cent after headline inflation fell to 2.7 per cent in April.

“In Canada, the thing is … pretty simple,” Mr. Hauser said.

Newly appointed Reserve Bank deputy governor Andrew Hausen said Australia will not be affected by recent rate cuts abroad in Canada and the UK

“Their interest rates were higher than ours. Their inflation is lower than ours, and their unemployment rate has risen significantly more than ours.

“I think if you took that data out of Canada and put it into the Australian context, you might see a different policy position.”

On Thursday, the European Central Bank followed suit with its own rate cut, cutting its key interest rate by 25 basis points to 3.75 percent, even as recent economic data suggested the eurozone faced a similar scenario to Australia in the form of an interest rate reduction. persistent inflation prices.

But Hauser said there is no guarantee the ECB will continue to cut rates.

“When I talk to some people on the ECB board, as I do, not all of them are sure where interest rates are going,” he said.

“So, I think, they were keen to start the rate cut cycle to show that they are independent of the US.

“But whether that goes much further and where it goes from here, I’m not so sure.”

Europe’s measure of underlying inflation, which excludes more volatile food and energy prices, accelerated again 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 cut rates, with money markets not pricing in monetary policy easing until May 2025.

Investors are keeping a close eye on the widening gaps between the world’s major central banks. These are an important driver of movements in the stock and currency markets.

Traders expect that the difference will be limited so far.

While the ECB and the BOC have already taken steps to cut rates, the BoE and the US Federal Reserve are each also expected to ease monetary policy.

Locally, however, the RBA is expected to be one of the last central banks to cut rates, with money markets not pricing in monetary policy easing until May 2025.

In Australia, underlying inflation remains higher than in international countries. In April, monthly inflation excluding volatile items and leisure travel rose to 4.1 percent, up from 4 percent in March.

New data released earlier this week showed the RBA’s aggressive rate hikes over the past two years have brought economic growth in Australia to a virtual standstill. prevent the economy from entering a recession.

GDP figures released on Wednesday showed the economy grew by a paltry 0.1 percent in the March quarter, a figure that took annual growth to just 1.1 percent – the weakest annual performance since the early 1990s recession , apart from the pandemic.

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