The RBA held the official cash rate at 4.10% today, quashing hopes of back-to-back rate cuts following February’s 0.25% reduction.
‘Recent information suggests that underlying inflation continues to ease in line with the most recent forecasts published in the February Statement on Monetary Policy,’ said the RBA today.
The board statement added that monetary policy ‘is well placed to respond to international developments if they were to have material implications for Australian activity and inflation.’
Some experts dubbed February’s RBA decision as a ‘benefit of the doubt rate cut’.
And minutes of that board meeting show that the decision ‘did not commit them [the RBA] to further reductions in subsequent meetings’.
So, no surprise today was a pause. In fact, the RBA has followed the US, which kept its interest rates on hold last month.
That said, Australia’s next quarterly inflation data is 30 April, and this could potentially trigger a May cut if inflation continues to sustainably sit in the 2-3% range.
To this point, headline inflation for February was slightly down at 2.4%, while the “trimmed mean” – the RBA’s preferred measure – dropped 0.1% to 2.7%.
The February RBA cut was expected to ease mortgage repayments by around $90-$150 per month (depending on loan size and conditions).
Banks and lenders passed on the reduction, though at least one large financial lender (Virgin Money) held off, frustrating some of its customers.
In March, Australian households were feeling more optimistic, too. The Westpac-Melbourne Institute Consumer Sentiment Index rose 4%, climbing from 92.2 in February to 95.9.
However, volatility in world markets could affect Australia.
For instance, US trade tariffs, particularly where China is affected, could have a negative impact on Australia’s economic outlook and potentially influence future interest rate decisions.
‘Recent announcements from the United States on tariffs are having an impact on confidence globally and this would likely be amplified if the scope of tariffs widens, or other countries take retaliatory measures.
‘Geopolitical uncertainties are also pronounced. These developments are expected to have an adverse effect on global activity.
‘Inflation, however, could move in either direction.’
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