The Reserve Bank of Australia (RBA) has announced that it will keep the cash rate target steady at 4.10% and maintain the interest rate on Exchange Settlement balances at 4.0%.
This decision follows a 25 basis point reduction in February, marking the first rate cut since late 2020.
Inflation has significantly declined since its peak in 2022, indicating that previous interest rate hikes have effectively balanced aggregate demand and supply. Recent data suggests that underlying inflation continues to ease, aligning with forecasts from the February Statement on Monetary Policy.
However, the RBA Board emphasised the need for confidence that this downward trend will persist to sustainably return inflation to the midpoint of the target range.
The labour market remains tight, with low rates of underutilisation despite a slight employment decline in February. Business surveys indicate that labour availability continues to be a constraint across various sectors. While wage pressures have eased more than anticipated, productivity growth has not improved, resulting in high unit labour costs.
Private domestic demand shows signs of recovery, with real household incomes increasing and some financial stress indicators easing. Nonetheless, certain businesses report challenges in passing cost increases to consumers due to weak demand.
The RBA Board remains vigilant regarding international developments, particularly recent tariff announcements from the United States, which have impacted global confidence. The potential expansion of tariffs or retaliatory measures could adversely affect global economic activity. The Board noted that monetary policy is well-positioned to respond if such international events materially influence Australian economic activity and inflation.
The RBA Board’s primary objective is to sustainably return inflation to the target range. While acknowledging the progress made, the Board remains cautious about the economic outlook, citing uncertainties in domestic activity, inflation trends, and global developments. Future monetary policy decisions will be guided by ongoing data assessments, with close attention to global economic conditions, financial markets, domestic demand, and labour market trends.
The Board reiterated its commitment to taking necessary actions to achieve its inflation targets, emphasising the importance of maintaining longer-term inflation expectations within the target range
Support Our Journalism
Global Indian Diaspora and Australia’s multicultural communities need fair, non-hyphenated, and questioning journalism, packed with on-ground reporting. The Australia Today – with exceptional reporters, columnists, and editors – is doing just that. Sustaining this needs support from wonderful readers like you.
Whether you live in Australia, the United Kingdom, Canada, the United States of America, or India you can take a paid subscription by clicking Patreon and support honest and fearless journalism.
