RBA board leaves interest rates on hold at 4.1 per cent after April meeting
In short:
The Reserve Bank has kept the cash rate target unchanged at 4.1 per cent in April, as had been widely forecast.
In a statement, the central bank's monetary policy board said tariff developments in the US were impacting confidence globally.
What's next?
The Australian Bureau of Statistics will release its next quarterly inflation update on April 30, ahead of the RBA's next meeting in mid-May.
Interest rates remain on hold, with the Reserve Bank board not delivering back-to-back cuts after its February move.
After a two-day meeting, the RBA board has announced that it has kept the cash rate target unchanged at 4.1 per cent.
At its last meeting in mid-February, it delivered a 0.25 of a percentage point cut — the first downward move in the cash rate since November 2020.
The post-meeting statement reiterated that "sustainably returning inflation to target is the priority".
"The continued decline in underlying inflation is welcome, but there are nevertheless risks on both sides and the board is cautious about the outlook," it read.
Following the decision, market pricing for another rate cut in May shifted, suggesting around a 75 per cent chance of a reduction in rates next month, compared to 85 per cent ahead of the announcement.
This is the first decision made by the new monetary policy board after the central bank's board was divided into two: one in charge of interest rate policy and the other, corporate governance.
The Australian dollar firmed and the stock market added modestly to its gains following the decision, with the S&P/ASX 200 ending 1 per cent higher on Tuesday.
Board didn't discuss cutting: Bullock
Speaking after the meeting, RBA governor Michele Bullock said that the board did not explicitly discuss the case for cutting rates in April.
"It did talk a little bit about downside risks, including the global downside risks. But it did not explicitly discuss a rate cut," Ms Bullock told reporters.
"So far, the information we've had since February indicate that things were on track, so we felt that holding was the best thing.
"It was a consensus decision."
Governor Michele Bullock said the RBA board didn't explicitly discuss a rate cut at the April meeting. (ABC News)
Ms Bullock said the election campaign didn't rate a mention at the meeting and was not a factor in the decision.
"The political cycle, we've just got to remain completely removed from."
Deloitte Access Economics' Pradeep Philip says while the decision not to cut rates may disappoint many, it should not come as a surprise.
"The RBA clearly sees the next move in inflation as an each-way bet and has decided to hold fire on a second consecutive rate cut.
"However, with geopolitical uncertainty and volatility skyrocketing, the Reserve Bank acknowledges risks to global economic growth and has placed itself on active watch," Dr Philip said.
Keeping 'cuts in the back pocket' for tariff fallout
The RBA board noted that recent announcements from the US on tariffs have had an impact on confidence globally.
"…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, particularly if households and firms delay expenditures pending greater clarity on the outlook.
"Inflation, however, could move in either direction."
Ms Bullock said while Australia is less directly exposed to the US than other countries, the economic impact will depend on what happens with reciprocal tariffs.
"Fragmentation in world trade, less open world trade, isn't great for Australia, because that's how we've thrived.
"Our scenarios suggest that, provided China leans in on this and gives fiscal stimulus, then we will see an impact on our GDP growth, but it won't be as dramatic as for some other countries that are caught up much more directly in these large tariff raises."
Moody's Analytics associate economist Shannon Nicoll said the RBA board may have been keeping its powder dry in case conditions deteriorate.
"Keeping some cash rate cuts in the back pocket could prove handy if demand flatlines or if heightened international uncertainty weighs heavily on Australia.
"Also, by holding rates steady, the bank gets a head start on inflationary risks," he wrote.
Capital Economics described the RBA's statement as "a touch more dovish" that the last meeting's statement, and forecast a rate cut next month, barring any upside surprises from the next quarterly inflation figures.
The Australian Bureau of Statistics will release the consumer price index (CPI) for the March quarter on April 30, providing an update on inflation ahead of the RBA's next meeting in mid-May.
Commonwealth Bank economists have forecast the trimmed mean CPI — a measure of underlying inflation — to come in at 0.6 per cent for the first quarter of the year.
That would be below the RBA's forecast of 0.7 per cent, and CBA's head of Australian economics Gareth Aird said that a trimmed mean below the central bank's expectations would make a cut in May a "done deal".
When asked about the CBA forecast specifically, Ms Bullock said Mr Aird was "much more certain than I am".
"I'm going to wait and see what the numbers tell me, and it will depend very much on what else is going on as well."
Ms Bullock denied that the post-meeting statement was "opening the door" to a May cut and said she was not giving any predictions.
"All it was meant to say is that we're cautious about the outlook."