Mortgage holders will have to wait a while longer for a second rate cut after the Reserve Bank of Australia left the official cash rate on hold at 4.10 per cent following Tuesday’s meeting of the monetary policy board.
In its statement on monetary policy, the RBA confirmed US President Donald Trump’s threat to expand his tariffs against Australia and its trading partners had weighed heavily in their decision.
“On the macroeconomic policy front, recent announcements from the United States on tariffs are having an impact on confidence globally and this would likely be amplified if the scope of tariffs widens, or other countries take retaliatory measures,” the board wrote.
“Geopolitical uncertainties are also pronounced.”
“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 board also cited fears of instability in Australia’s inflation rate.
“Inflation, however, could move in either direction,” the RBA board said.
“Many central banks have eased monetary policy since the start of the year, but they have become increasingly attentive to the evolving risks from recent global policy developments.”
The hold was widely expected, with money markets saying there was only about a 20 per cent chance of a cut in April.
Independent economist Saul Eslake said the RBA would weigh up quarterly jobs and inflation data, due out at the end of April, before deciding its next move.
“The new monetary policy committee will be waiting for more data on the extent to which inflation and in particular its preferred measure of ‘underlying’ inflation has continued to fall,” he said.
AMP chief economist Shane Oliver said while the RBA would be unlikely to cut interest rates in the middle of an election, the numbers didn’t stack up for a back-to-back rate cuts.
“I think the RBA is in a cautious mode. Back in February when they cut, they made it quite clear they were wary of cutting again, as they are still concerned inflation is too high and they are still worried about a tight jobs market,” Dr Oliver said.
“I don’t think we’ve seen enough to alter that, as the unemployment rate is still 4.1 per cent, and even though inflation is running below the RBA’s forecast, we know the monthly numbers can be quite volatile, adding to the case to wait for the quarterly.
The interest rate hold comes after the RBA cut the official cash rate from 4.35 to 4.10 per cent in February.
RBA governor Michele Bullock used her last press conference in February to call for mortgage holders to “be patient” when it comes to future rate cuts.
Ms Bullock issued the stark warning following a question from NewsWire, acknowledging she had received letters from struggling homeowners suffering through an extended period of crippling interest rate rises.
“I understand you are hurting, and I understand mortgage rates have increased a lot … but we need to get inflation down because that is the other thing that is really hurting you,” she said.
“If we don’t get inflation down, interest rates won’t come down, and you’ll be stuck with inflation and high interest rates.”