The Reserve Bank of Australia (RBA) building is seen behind construction fences on August 06, 2024 in Sydney, Australia.
Lisa Maree Williams | Getty Images News | Getty Images
The Reserve Bank of Australia on Tuesday expectedly held its benchmark policy rate at 4.1%, despite having flagged earlier that inflation was declining at a faster pace than expected.
The country’s inflation reading in February came in at a softer-than-expected 2.4%.
In its last meeting, the central bank said that “some of the upside risks to inflation appear to have eased,” noting a sharper-than-anticipated decline.
However, the bank also added that if monetary policy was eased “too much too soon,” it could impede the progress on inflation, and it might not hit RBA’s target range 2%-3%. Inflation has stayed within the bank’s target range since August 2024, and prompted the bank to cut rates in February.
Australia’s GDP grew at 1.3% year on year in the fourth quarter of 2024, beating expectations and marking its fastest growth in a year.
RBA Governor Michelle Bullock said after the previous meeting “we cannot declare victory on inflation just yet. It is not good enough for inflation to be back in the target range temporarily. The Board needs to be confident that is returning to the target range sustainably.”
When asked if the February rate cut was a “one and done” decision, Bullock said the market was expecting about three more cuts on top of the February rate cut, but “our feeling at the moment is that that is far too confident.”
Australia’s government is in a caretaker mode, with Prime Minister Anthony Albanese on Friday calling a national election for May 3.