Reserve Bank keeps rates on hold at 4.1%
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The news: The Reserve Bank has kept rates on hold at its second meeting of 2025. This was widely expected by economists, with minimal data being released since the last rate meeting to justify a further easing.
The numbers: The RBA cut in February by 25 basis points to its current rate of 4.1% after a more than year-long pause at 4.35%. It was the first cut since 2020 and was described by the central bank as a reversing of the "cautionary increase" in November 2023, imposed after a surprisingly strong inflation read.
Inflation on an underlying basis has been coming down, albeit slowly, towards the 2% to 3% target. Economists are split on how many more rate cuts are likely this year.
The context: This is the only mid-election campaign rate decision from the central bank. At its February meeting, governor Michele Bullock urged caution from those predicting a raft of rate cuts over 2025 with the markets at that point pricing in three more cuts.
While the global economy was a live discussion point at that meeting, the US administration's tariffs and rising geopolitical uncertainties impacting the Australian economy have intensified as a theme. The federal government has also unveiled a highly unexpected fourth budget since the last rate decision.
This is the first meeting of the newly separated monetary policy board at the RBA. It includes two new board members. The Coalition has previously raised concerns about continuity at a board level, but Bullock has not indicated any issues.
What they said: "Uncertainty about the outlook abroad ... remains significant. On the macroeconomic policy front, 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," the board said in a statement.
"Geopolitical uncertainties are also pronounced. These developments are expected to have an adverse effect on global activity, particularly if households and firms delay expenditures pending greater clarity on the outlook," the statement said.
"Inflation, however, could move in either direction. 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."
The source: Reserve Bank board decision statement
