RBA Holds Rates Steady, Signals Readiness to Ease

At its April 1st meeting, the Reserve Bank of Australia (RBA) kept the cash rate target at 4.1%, as widely expected, following its first rate cut in four years in February.

RBA: Readiness to “Respond”

The RBA acknowledged that inflation has declined significantly since its 2022 peak, attributing this to higher interest rates bringing demand and supply into better balance.

However, the Board stressed the need for continued confidence that inflation will return sustainably to the midpoint of the target band.

Additionally, the RBA highlighted its readiness to respond to global risks, particularly the potential negative impact of U.S. tariffs on global growth.

The cautious stance reflects concerns over trade disruptions and their implications for Australia’s trade-dependent economy. Future policy decisions will depend on ongoing assessments of labor market conditions, inflation trends, and global trade developments.

Dovish or Hawkish RBA?

While the RBA did not signal any immediate rate cuts or a clear policy path, its message remained mixed. RBA Governor Michele Bullock stated that while the board did not “explicitly” consider a rate cut in this meeting, they remain vigilant on international developments that could impact domestic economic conditions.

However, the mention of being “ready to respond” to global risks and acknowledging cooling inflation suggests a shift toward a more dovish stance, said Ultima Market Senior Analyst Shawn.

“Compared to the RBA’s stance before the February rate cut, this is undeniably more dovish. We are likely to see the next cut by mid-2025, especially if the Quarterly Consumer Price Index, set for release at the end of April, shows a convincing decline in inflation,” Shawn added.

Overall, this meeting would be considered a dovish signal from the RBA, but the trajectory of future policy decisions will depend on upcoming Australian economic data.

Looking ahead, the RBA is set to release its Financial Stability Review on April 3, 2025, offering further insights into the central bank’s assessment of economic conditions and potential risks.

Market Reaction: Australian Dollar Holds Steady

Despite the slightly dovish tone from the RBA, the mixed signals have kept the Australian Dollar steady against major currencies following the rate decision.

(AUDUSD, 4-Hour Chart Analysis; Source: Ultima Markets MT4)

The Australian Dollar briefly broke down against the US Dollar from its recent range but quickly reversed. The lack of a strong market catalyst, coupled with the recent cooling of global trade sentiment, has helped the risk-sensitive Australian Dollar remain steady.

From a technical perspective, AUDUSD is expected to continue trading within the range of 0.63200 to 0.62600, unless a clear shift in market sentiment prompts a breakout.

Disclaimer

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