The Reserve Bank of Australia (RBA) announced its May interest rate decision, cutting the rate by 25 bps to 3.85%, in line with market expectations.

Australian inflation has relieved since peaking in 2022, with first-quarter inflation data confirming further deceleration, the decision noted. The central bank's forecasts released today indicated that, as temporary factors wane, nominal inflation was expected to rise to the upper end of the target range of 2-3% over the next year, while core inflation was expected to remain around the midpoint of 2-3% for most of the forecast period.

Global economic uncertainty has intensified over the past three months, with enormous volatility in financial markets, the RBA said. Recent tariff news has led to a rebound in financial markets, but the final tariff rates and responses from other countries remain highly uncertain.

Following the interest rate decision, the Australian dollar waned, dipping 0.4% during the Asian session to 0.6429 against the US dollar.