With an eye on the benchmark Aussie interest rate, CEOs of some of the biggest S&P/ASX 200 Index (ASX: XJO) bank stocks are keeping a close watch on the United States.
Or more accurately, on the ever-evolving and fast-moving policies being rolled out by US President Donald Trump.
Atop imposing sweeping tariffs on its global trading partners, including Australia, the new administration is looking to ease banking regulations instituted in the wake of the GFC in 2008. That could see stringent capital requirement for big US banks, intended to prevent mass insolvencies, rolled back.
Though it's the potential for a tariff-driven global trade war that has the ASX 200 bank bosses fearing higher inflation could abruptly end further interest rate cuts from the Reserve Bank of Australia.
Last month, on 19 February, marked the first time ASX 200 investors enjoyed an RBA cut since November 2020, when the central bank slashed rates to the all-time low of 0.10%. February's 0.25% cut brought the official Aussie interest rate down to 4.10%. Investors and mortgage holders alike are now hoping to see another reduction when the board next meets on 1 April.
But with Trump's tariffs creating global uncertainty and potentially driving prices higher, the RBA may follow the lead of the US Federal Reserve.
Overnight, the Fed opted to keep interest rates in the US on hold in the range of 4.25% to 4.50%. That's down from 5.25% to 5.50% last August following three cuts in 2024.
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What are the ASX 200 bank chiefs saying on tariffs and interest rates?
Speaking at the Financial Review Banking Summit, Commonwealth Bank of Australia (ASX: CBA) CEO Matt Comyn cautioned that the impact from tariffs could hit global growth for a number of years.
"We're relatively well insulated versus many other countries, but we won't be entirely from China, which was already struggling to gain momentum before the administration change," he said (quoted by The Australian Financial Review).
Comyn said this could impact global economic growth "for at least a couple of years".
National Australia Bank Ltd (ASX: NAB) CEO Andrew Irvine believes the real impact may not be felt until next year, and beyond.
"The thing I worry about is … beyond 2025," Irvine said.
As for future interest rate cuts from the RBA, Irvine added:
If we do have a global tariff war and all that drama and tit-for-tat stuff does turn into bilateral trade reducing and 25% tariffs on a vast majority of goods and services, that's highly inflationary.
And if global inflation ticks up, what that means is that interest rates will not reduce to the level they otherwise would … if this tariff does happen, we could be at the end of the reduction cycle.
NAB currently still expects the RBA to announce two 0.25% interest rate cuts in 2025. But those could be at risk if global inflation levels heat up.
