SYDNEY (Reuters) – Australia’s central bank on Tuesday left its cash rate steady as widely expected, saying it was still cautious about the outlook, although the risk is U.S. tariffs could be a drag on global growth.
Wrapping up its April policy meeting, the Reserve Bank of Australia (RBA) held interest rates steady at 4.1%, having just cut them by a quarter point in February for the first time in over four years.
Markets had seen scant chance of a further easing this week given policy makers had emphasised that they needed to be certain core inflation was under control before acting again. [AU/INT]
“The Board noted that monetary policy is well placed to respond to international developments if they were to have material implications for Australian activity and inflation,” the board said in a statement.
The statement also dropped an explicit reference to being cautious about cutting rates again, in a slightly dovish sign for policy.
The Australia dollar was 0.1% higher at $0.6256, while the three-year bond futures held steady at 96.31. Swaps imply there is a 60% probability that the RBA could cut at the next policy meeting in May.
The recent flow of data have printed largely in line or slightly weaker than expected. A benign inflation reading for February has raised hopes that the quarterly price data due at the end of the month would be tame enough for the RBA to move in May.
The steady decision means the centre-left Labor government won’t get a rate cut boost in polling ahead of a general election on May 3. Prime Minister Anthony Albanese is struggling in polls over the high costs of living and housing.
The central bank has pushed back against easing expectations after the rate cut in February, which already lifted housing prices to a record last month.
GLOBAL UNCERTAINTIES
Australia’s economy has moved past its worst, with consumer spending picking up amid lavish government tax cuts. However, the outlook has been clouded by the spectre of a global trade war as U.S. President Donald Trump imposes a blitz of tariffs on trading partners and is set to announce reciprocal tariffs imminently.
“Geopolitical uncertainties are also pronounced,” the RBA said in its statement, adding that U.S. tariffs are having an impact on confidence globally .
Australia is a major exporter of resources to China and tariffs on the world’s second-biggest economy’s goods could hinder growth there and its demand for commodities.
The Federal Reserve has taken a cautious approach to further rate cuts due to concerns Trump’s policies will stoke inflation, though investor anxiety over a possible U.S. recession has also risen in recent months.
“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 RBA added.
“Inflation, however, could move in either direction.”
(Reporting by Stella Qiu and Wayne Cole; Editing by Shri Navaratnam)
Comments