FX.co ★ RBA Sees U.S. Tariffs as Global Risk, Disinflationary for Australia

The Reserve Bank of Australia (RBA) has expressed concerns that increased U.S. tariffs might adversely affect the global economy, potentially leading to a short-term decrease in the prices of traded goods. The impact, however, remains uncertain due to fluid policy changes. During a speech in Brisbane, RBA Assistant Governor Sarah Hunter highlighted that such uncertainty could hinder investment, production, and employment on a global scale. "The unpredictability and unprecedented nature of the current situation make it difficult to precisely determine the impact," she explained. In May, the central bank reduced interest rates to 3.85%—a two-year low—partly in anticipation of pressures on Australia's economy and labor market. The board is currently evaluating both a severe downside scenario and a more optimistic trade peace scenario, with Hunter indicating that future decisions will be informed by scenario tracking from the May Statement on Monetary Policy. The RBA considers the tariffs as exerting a disinflationary effect on Australia, as reallocated Chinese exports may reduce import prices.