Reserve Bank of Australia holds interest rates steady at 4.10%

Inflation has significantly fallen from its 2022 peak, with recent data aligning with the RBA’s February forecasts. Higher interest rates have helped bring demand and supply closer into balance. However, the Board emphasised the need for confidence that inflation will sustainably return to the midpoint of its target band before considering any policy changes, the Monetary Policy Board said in a statement.

While domestic private demand appears to be recovering and real household incomes are rising, the RBA highlighted persistent challenges. Certain sectors report ongoing weakness in demand, which is limiting businesses' ability to pass on rising costs. Labour market conditions remain tight despite a dip in employment in February, with many employers still facing labour shortages. Although wage pressures have eased slightly, productivity growth remains subdued and unit labour costs are still high.

Looking ahead, the economic outlook remains clouded by uncertainty. Household consumption is expected to rise in line with income growth, but a slower-than-anticipated recovery could dampen output and put further pressure on employment. Conversely, the labour market may prove more resilient than currently projected.

The RBA also pointed to global risks, including uncertainty over the impact of recent US tariff announcements and geopolitical tensions, which could affect business and consumer confidence. Central banks around the world have generally eased monetary policy this year but are closely watching evolving risks.

The RBA reiterated that sustainably returning inflation to target remains its top priority. While recent trends in inflation are encouraging, the Board stressed that monetary policy remains restrictive and that it will respond as needed to ensure inflation expectations remain anchored.

Future decisions will be guided by incoming economic data and a continued assessment of both domestic and global risks, with a strong focus on inflation, demand, and labour market developments, the statement added.

ALCHEMPro News Desk (KD)