The other main event overnight has been the RBA’s latest policy meeting. The RBA decided to leave their policy rate unchanged at 4.10% as expected after delivering the first rate cut in the easing cycle at the previous meeting in February.
In the accompanying policy statement, the RBA the acknowledged that underlying inflation continues to ease in line with their recent forecasts but they reiterated that they ”need to be confident that this progress will continue so that inflation returns to the midpoint of the target band on a sustainable basis”. The RBA described uncertainty about the outlook abroad as remaining “significant”.
The RBA believes that President Trump’s tariff announcements 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 high level of uncertainty is expected to have an adverse impact on global activity by delaying spending decision for households and firms. The RBA noted that it pay close attention to these developments when setting monetary policy, and will rely on the data and evolving risk assessment to guide its decisions.
The RBA’s caution over committing to the timing of further rate cuts was also evident in the press conference. Governor Bullock noted that they discussed downside risks to growth both at home and abroad but that the impact on inflation was less certain. She signalled that the RBA has not made up its mind yet on whether to cut rates again at the next meeting in May.
Adding that she is a little more circumspect on rates than markets and doesn’t have 100% on inflation yet. In contrast, the Australian rate market is more fully pricing in another RBA rate cut in May. The relatively hawkish comments from the RBA overnight have provided some support for the Australian dollar although it remains vulnerable to the risk of a more disruptive tariff announcement from President Trump tomorrow.
