Australian stocks rise slightly as RBA cuts cash rate
Australian shares have seen a small lift after the RBA dropped the cash rate by 25 basis points to 3.85%.
The ASX200 is up 0.58% as of 4:20pm after the Reserve Bank cut the cash rate at its meeting this afternoon.
It marks the second rate cut in 4 years following the RBA's much anticipated rate decrease on February 18 to 4.10%.
Just a couple of weeks ago, markets had been pricing in multiple rate cuts in 2025 after President Donald Trump's tariff announcement sent global stocks plunging and sparked fears of a recession.
But that view softened after Trump paused higher tariffs for 90 days and last week agreed to lower tariffs on goods from China from 120% to 30%.
The S&P/ASX200, S&P500 and Nasdaq Composite have since fully recovered after falling more than 10% in 2 days following the Liberation Day market chaos.
Why did stocks jump?
Markets usually price in the RBA's decision in the days prior, so the share market response can be muted on the day itself.
But while the February rate cut was mostly expected, the May decision has been far less so.
Last week, markets had priced in just a 51% chance of a rate cut, according to the ASX rate tracker, highlighting the uncertainty whipped up by Trump's chaotic tariff announcements.
While Australia's major banks had been cutting mortgage rates in the lead up to the decision, the RBA has previously warned not to pin hopes on further rate cuts this year.
In the February meeting, RBA Governor Michele Bullock said any hope of multiple rate cuts by mid-2026 was "unrealistic".
The May rate cut was a bit of good news for share investors and mortgage holders alike, and stocks responded accordingly.
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