The Reserve Bank of Australia (RBA) kept its cash rate unchanged at 4.10% at its April 1st meeting, maintaining its cautiously optimistic stance on inflation while expressing concerns about global economic uncertainties, particularly related to US trade policies.
The decision to hold rates steady was widely anticipated by markets, with traders having priced in approximately 93% odds of no change ahead of the meeting. This follows the RBA’s first rate cut in over four years, which occurred in February 2025 when the bank lowered rates from 4.35% to 4.10%.
Key Takeaways:
- RBA maintained cash rate at 4.10% as widely expected
- Underlying inflation continues to ease in line with forecasts
- Labor market conditions remain tight despite February employment decline
- Board dropped explicit reference to being cautious about further rate cuts
- Growing concerns about U.S. tariff policies impacting global confidence
- Markets price in 70% probability of a rate cut in May
In its statement, RBA noted that “underlying inflation is moderating” and has “fallen substantially since the peak in 2022,” but said it still needs more confidence that the trend will continue before easing again. The board kept its line that policy remains “restrictive,” meaning it still sees some downward pressure on inflation.
What caught traders’ attention was a subtle shift, as the RBA dropped an explicit reference to being cautious about cutting rates further, which analysts interpreted as a slightly dovish signal. That was enough for markets to bump up the odds of another rate cut in May to about 70%, with the cash rate possibly falling to around 3.35% by year-end.
The RBA also spent more time than usual discussing global risks, particularly the U.S. tariffs. “Recent announcements from the United States on tariffs are having an impact on confidence globally,” the bank said, warning that wider or retaliatory measures could hurt global growth and add to inflation uncertainty.
Link to official RBA Monetary Policy Statement for March 2025
During the press conference, RBA Governor Michelle Bullock reiterated that they cannot declare victory on inflation just yet, explaining that their decision to ease was not a signal for a series of forthcoming reductions. She explained that this cut was a “difficult decision” and that further cuts would depend on incoming data.
Link to RBA Press Conference for March 2025
Market Reaction:
Australian Dollar vs. Major Currencies: 5-min
Overlay of AUD vs. Major Currencies Chart by TradingView
The Aussie initially dipped across the board after the RBA’s statement leaned slightly dovish, trimming earlier gains made during the Asian session as Hong Kong and China markets opened.
But about 30 minutes later, AUD caught a bid and surged to fresh intraday highs after Gov. Bullock pushed back against rate cut expectations by stressing two-sided inflation risks.
AUD is seeing the strongest gains against EUR, CAD, and USD while seeing more limited gains against JPY.
