RBA may cut rates at May meeting as US-China tensions ease

Analysts surveyed by Bloomberg forecast that the Reserve Bank of Australia (RBA) will announce a quarter-percentage-point rate cut at its meeting on Tuesday. If monetary conditions are eased, the rate will reach a two-year low of 3.85%.

Recent events raise the possibility of a hawkish rate cut in May by the Australian central bank. These include easing price pressures in the country and the 90-day trade truce between the US and China.

The RBA will release updated quarterly macroeconomic forecasts on Tuesday. Strategists surveyed by Bloomberg anticipate downward revisions to Australia's inflation and GDP projections.

Previously, the RBA sought to hold onto labor market gains as it slowed price growth. These measures drew sharp criticism from market participants. However, this approach is yielding results. As noted by the agency, core inflation returned to the 2–3% target last quarter for the first time in over three years, while unemployment remains steady at 4%.