MNI RBA Review-April 2025: Keeping Options Open

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EXECUTIVE SUMMARY: 

• The RBA left rates unchanged at 4.10% on April 1, as was widely expected given the cautious tone following February’s 25bp cut. In the press conference, Governor Bullock said that it was a consensus decision and that easing wasn’t part of the discussion.
• It appears that the RBA is keeping its options open given that risks are to both sides and there is significant uncertainty around the outlook, especially from overseas. Upcoming Q1 CPI and March/April jobs data will be important in determining if the Board has become "more confident" that underlying inflation is returning "sustainably" to the mid-point of the target band, which enable it to consider the timing of the next rate cut.
• The central bank believes that Australia is unlikely to experience major direct effects from US tariffs given its small exposure to the US, but key concerns centre around how its main trading partners (China) & supply chains are affected and what retaliatory measures are taken. It noted that policy is "well placed to respond".
• A 25bp rate cut in May is given a 77% probability, with a cumulative 71bps of easing priced by year-end.