Following the Reserve Bank of Australia's first rate cut in five years, policymakers opted to hold rates steady at 4.1% following their two-day policy meeting on Tuesday, largely in line with market expectations.
Board members noted that underlying inflation is easing, aligning with forecasts, however, policymakers remain cautious to ensure inflation returns to target sustainably.
The board noted that the outlook remains uncertain, with recovering domestic demand and rising household incomes offset by weak business pricing power.
Labour market conditions also remain tight, with labour shortages persisting despite easing wage pressures and high unit labour cost growth.
The board noted continued concerns regarding the international outlook, as recent tariff announcements from the United States dampen global confidence, with potential spillover effects if trade tensions escalate further.
Inflation, however, “could move in either direction”, as many central banks worldwide have eased monetary policy, and are now becoming “increasingly attentive to evolving risks from global policy developments”.
Officials are assessing the current policy settings as “restrictive” and reiterated their determination to “sustainably return inflation to target”.
Reserve Bank Governor Michele Bullock noted at the following press conference that despite global news, the domestic economy has evolved as expected, with low unemployment and moderating inflation.
Regarding impending tariffs, she noted the importance of major trading partners and China, with continued fiscal support from Chinese authorities potentially reducing impacts on Australian activity.
