RBA keeps rates on hold

The Reserve Bank has chosen to keep Australia’s cash rate on hold during its April 1 meeting. 

RBA governor Michele Bullock and her monetary policy board opted to cement interest rates at 4.1 per cent as the threat of US tariffs and rising recession fears dominate the global conversation.

Ultimately, Australia’s better-than-expected inflation numbers weren’t enough to move the needle and justify a cut during the current cycle.

In a statement after the board meeting, Ms Bullock said Australia’s current monetary policy was well placed to combat “international developments”.

“On the macroeconomic policy front, recent announcements from the United States on tariffs are having an impact on confidence globally.

“This would likely be amplified if the scope of tariffs widens, or other countries take retaliatory measures. 

“Many central banks have eased monetary policy since the start of the year, but they have become increasingly attentive to the evolving risks from recent global policy developments.”

Ms Bullock also acknowledged the downward trend in domestic inflation, noting it was in line with the Reserve Bank’s most recent forecasts.

“Nevertheless, the board needs to be confident that this progress will continue so that inflation returns to the midpoint of the target band on a sustainable basis,” Ms Bullock said.

“It is, therefore, cautious about the outlook.”

Banks and analysts had widely priced in a hold following today’s meetings, despite data suggesting that headline inflation was falling faster than expected.

REA Group executive manager of economics Angus Moore was one of the pundits who believed an April rate cut was unlikely.

“The RBA has been cautious about cutting too quickly because of how strong the labour market is,” he said.

“How soon and how many cuts we see will really be dictated by that.”

Today’s meeting marks the RBA’s final monetary policy decision before Australians head to the polls for the federal election on May 3.

The decision to hold comes not long after the Reserve Bank’s February meeting delivered the first rate relief in years, bringing the cash rate down 25 basis points from 4.35 per cent.

And despite opting for no changes today, waning domestic inflation may give the RBA the impetus it needs to cut rates later this year – perhaps as soon as its May 20 meeting.

Still, Australia Insitute chief economist Greg Jericho said today's decision to keep interest rates on hold was just as political as if the RBA had cut rates. 

Consequently, he believes that the bank should have cut rates instead of tiptoeing "around the sensitivities of our political leaders".

"When rates were going up, the bank had no problem slugging borrowers ten times in a row," Mr Jericho thundered.

"Now that rates are coming down – and the bank board is meeting less often – the RBA is more worried about appearing political than doing the right thing by Australians."

"Interest rate cuts never happen as a one-off. The RBA has already indicated that more are coming. So, I repeat, why wait?"

Conversely, Deloitte Access Economics leader Pradeep Philip says Australians should be disappointed, but not surprised, by the latest RBA decision.

"February’s rate cut was a cautious one, made with one eye on the various upside risks to inflation: a tight labour market, considerable geopolitical uncertainty around tariffs, and low productivity growth.

"Two months on, and these factors are still in play and are clearly being closely watched by the RBA’s new-look monetary policy board."

Still, Mr Philip is firm that further rate cuts are on the cards, forecasting a 50 basis point drop to the cash rate between now and year's end.