The RBA has kept the cash rate on hold at 4.1% at its April meeting. This outcome was widely expected (and priced) by markets, following the guidance at the RBA’s February Board Meeting and the RBA’s preference to wait for the full quarterly CPI to confirm the trend for inflation.

CreditorWatch expects another interest rate cut to be delivered very soon – most likely at the May RBA Board meeting – as lower interest rates and cost of living support are both likely to be required to buffer Australian economic growth from the negative effects of US tariff policy and slower population growth on growth and unemployment in the medium term.

Monetary policy is still restrictive, momentum in the economy is not strong, population growth is slowing, confidence will be affected by weaker equity markets and the negative impacts of US tariffs on global growth, while inflation continues to moderate toward target in Australia. With monetary policy operating with a lag, the RBA should not be delaying easing further as it is mandated to deliver full employment and low inflation.

Cost of living support announced by both the Labor and Liberal parties in recent days will be helpful, but the question is whether the RBA should maintain a restrictive policy in the face of inflation developments given the emerging growth outlook is weak, as threats to growth evolve.