Australia's central bank on Tuesday said inflation would be lower and unemployment higher due to the cascading effects of global trade tensions, and that was even assuming interest rates were cut as deeply as markets expected.

Australia’s central bank cut interest rates for a second time, citing easing inflation risks, but warned of ongoing shocks to the global economy from the U.S. trade policies and a deteriorating geopolitical environment.

Australia’s central bank on Tuesday reduced its benchmark interest rate by a quarter percentage for a second time this year, to 3.85% after inflation fell within a target range. The Reserve Bank of Australia reduced its cash rate from 4.