Investing.com-- The Reserve Bank of Australia will likely look past a stellar job market reading for April, ANZ said in a Thursday note, with the central bank still expected to cut interest rates by 25 basis points.
Australia’s labor market grew substantially more than expected in April, bringing the participation rate back in sight of record highs amid continued strength in the labor market.
A shortage of skilled workers in several sectors has kept the Australian labor market tight for at least the past three years.
While a stronger labor market usually gives the RBA less impetus to cut rates, ANZ said the central bank is likely to look past April’s strong job reading and cut interest rates further.
ANZ sees a 25 bps cut by the RBA when it meets next week, which will bring benchmark rates to 3.85%. The brokerage stated that a sustained decline in Australian inflation was likely to spur the RBA to cut, despite heightened uncertainty over global trade tariffs.
The RBA kicked off an easing cycle earlier this year with a 25 bps cut, its first since the 2020 COVID-19 pandemic.
But the central bank has repeatedly warned that it will not cut rates rapidly, and that any future easing is largely contingent on economic data. Inflation and the labor market are the RBA’s two biggest considerations.
But while inflation has fallen steadily, the labor market has remained tight, presenting potential upside risks to price pressures and keeping the RBA on edge.