Major interest rate development millions of Aussie homeowners need to know about after Trump tariffs

By STEPHEN JOHNSON, ECONOMICS REPORTER FOR DAILY MAIL AUSTRALIA

Published: 00:15 BST, 3 April 2025 | Updated: 00:41 BST, 3 April 2025

Financial markets are now widely expecting a May interest rate cut as a result of Donald Trump’s broad-based tariffs. 

The 30-day interbank futures market is now regarding a May 20 rate cut from the Reserve Bank of Australia as an 85 per cent chance. 

This would see the cash rate fall to 3.85 per cent for the first time since June 2023, following the RBA’s next two-day board meeting. 

Prime Minister Anthony Albanese has confirmed Australia would not retaliate to the 10 per cent tariffs on Australian exports, on top of the 25 per cent tariffs on steel and aluminium. 

‘A reciprocal tariff would be zero, not 10 per cent,’ he said.

While the American tariffs could push up inflation, central bankers are more concerned about global trade wars slowing economic growth. 

This would especially be the case in Australia, which relies on global trade for its prosperity. 

Reserve Bank of Australia Governor Michele Bullock made this point on Tuesday, as the RBA left rates on hold at 4.1 per cent. 

Financial markets are now widely expecting a May interest rate cut as a result of Donald Trump ‘s widespread tariffs

‘We do know what to be worried about,’ she told reporters in Sydney.

‘A trade war with escalating tariffs and reciprocal tariffs is going to slow down the growth in world trade and Australia as a small, open economy has benefited massively from open trade.

‘So, it’s not good for us, a world trading system that is fragmenting, that’s not good for us.’

The share market has reacted badly to Trump’s tariffs announcement, with the benchmark S&P/ASX200 plunging by 1.99 per cent in the opening half-hour of trade on Thursday morning. 

The Australian Agricultural Company did even worse with its share price plummeting by 3.18 per cent to $1.37.

The 30-day interbank futures market is now regarding a May 20 rate cut from the Reserve Bank of Australia as an 85 per cent chance after Donald Trump announced broad 20 per cent tariffs on Australia

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Major interest rate development millions of Aussie homeowners need to know about after Trump tariffs

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