RBA’s Hauser says measures of global trade uncertainty are at 50 year highs

Reserve Bank of Australia

• Measures of global trade uncertainty are at 50-year highs.
• Risk for Australia would be if US tariffs triggered a global trade war.
• Markets realising that trade uncertainty could see firms and households batten down the hatches.
• Such ‘watchful waiting’ could prove economically damaging in aggregate.
• Possibility of such an effect played a part in the RBA’s February rate cut.
• February rate cut reduced the risks of inflation undershooting the 2.5% target.
• Board does not currently share market confidence that a sequence of further rate cuts will be required.
• Progress on inflation has been good, but too soon to declare victory.
• Judge that labour market conditions will remain relatively tight over forecast period.
• Recognise risk we have overestimated tightness of labour market.

Hauser is being careful here. I read between the lines here that if the **** hits the fan on the hit to global trade the RBA will quickly move to further rate cuts. The chaos being fed into markets by Trump will take a toll on business confidence and yeah, a “batten down the hatches” will hit employment across the globe. Precarious times indeed.

This article was written by Eamonn Sheridan at www.forexlive.com.