The US Federal Reserve went “bang” with its first interest rate cut this decade, creating another headache for the Reserve Bank of Australia.
Fed chairman Jerome Powell declared the half a percentage point cut in the bank’s key lending rate a “good strong start” that gave it options in coming months.
Federal Reserve chairman Jerome Powell says the US economy is in a good position but the jobs market may be turning.Credit: Bloomberg
“We can go quicker if that’s appropriate, we can go slower if that’s appropriate, we can pause if that’s appropriate,” he said.
Whether the Fed goes quicker will largely come down to the American jobs market, which was starting to show signs of struggling under the bank’s previous 5.25-5.5 per cent key lending rate. And that’s where the lesson is most important for the Reserve Bank.
Central banking is built on a series of trade-offs.
The Fed pushed its key lending rate from zero to between 5.25 and 5.5 per cent from March 2022 to the middle of 2023. Compared to the RBA – which took the cash rate here from 0.1 per cent to 4.35 per cent between May 2022 and November........