Australian banks warn tariffs may hinder rate cuts

Leaders from Commonwealth Bank (CBA) and National Australia Bank (NAB) are warning that ongoing trade tensions between the U.S. and China may interfere with future interest rate cuts in Australia. This uncertainty follows a recent reduction in the official cash rate that provided some mortgage relief to homeowners. In a recent poll, many homeowners expressed that the February 0.25 percentage point cut by the Reserve Bank of Australia (RBA) would not significantly impact their finances. CBA’s chief executive, Matt Comyn, indicated that homeowners might not see more mortgage relief due to U.S. tariffs affecting China. He noted that Australia is not entirely shielded from the economic challenges faced by China. Comyn mentioned the possibility of a prolonged period of slower global economic growth due to trade tariffs. He highlighted that the current situation may lead to unpredictable market movements. Similarly, NAB's head, Andrew Irvine, warned that local inflation could rise as a result of the U.S.-China trade war. If tariffs increase significantly, he suggested this could halt any further interest rate cuts by the RBA. CBA has forecasted there might be three more rate cuts in the current cycle, while NAB anticipates four. These potential cuts could bring the cash rate down to between 3.10% and 3.35%. RBA Governor Michele Bullock will need to consider the impact of U.S. tariffs on her interest rate decisions moving forward.