As broadly expected, the RBA has kept the official cash rate unchanged at 4.10% at its April policy meeting, maintaining the interest rate on Exchange Settlement balances at 4.00%, as it continues to assess the balance between easing inflation and ongoing economic uncertainties, largely beyond our shores.
Inflation moderating
In a statement issued on Tuesday, the central bank confirmed that underlying inflation is moderating, with recent data indicating that price pressures continue to ease in line with its most recent forecasts.
That said, the Board stressed that it remains “cautious about the outlook” and that inflation must return to the midpoint of its 2 to 3% target band “on a sustainable basis”.
Private domestic demand is showing early signs of recovery, aided by rising real household incomes and some easing in financial stress.
Nonetheless, the Board noted that demand remains uneven across sectors, with some businesses still unable to fully pass on cost increases to consumers.
Labour market conditions remain tight despite a fall in employment in February.
Measures of underutilisation remain low, and business surveys suggest that labour availability continues to constrain activity in some areas.
Productivity still weak
Although wage pressures have eased slightly more than expected, productivity growth remains weak and unit labour costs are still rising at an elevated pace.
Internationally, the outlook remains clouded by some looming geopolitical and macroeconomic risks.
The RBA mentioned the controversial recent tariff announcements in the US, warning that global confidence could be affected further if the scope of trade measures widens or if, as expected, retaliatory policies are implemented by governments around the world.
“These developments are expected to have an adverse effect on global activity,” the central bank said.
Despite the easing in inflation, the RBA reiterated that “monetary policy remains restrictive” and reaffirmed its commitment to returning inflation to target.
The Board said it will “rely upon the data and the evolving assessment of risks to guide its decisions” and remains resolute in doing what is necessary to restore price stability.