The Monetary Policy Board announced its decision to maintain the cash rate target at 4.10 percent and the interest rate on Exchange Settlement balances at 4 percent. This decision comes amid moderating inflation, which has decreased significantly since its peak in 2022 due to higher interest rates aimed at balancing aggregate demand and supply. However, the Board remains cautious: "Recent information suggests that underlying inflation continues to ease in line with the most recent forecasts published in the February Statement on Monetary Policy. Nevertheless, the Board needs to be confident that this progress will continue so that inflation returns to the midpoint of the target band on a sustainable basis."
The Board believes that monetary policy is prepared to address international developments should they significantly impact Australian activity and inflation. The economic outlook is considered uncertain, with private domestic demand showing signs of recovery as real household incomes rise and financial stress eases. Despite this, some sectors report difficulties in passing cost increases onto consumers due to weak demand.
Labour market conditions remain tight, although employment declined in February. "Measures of labour underutilisation are at relatively low rates," according to the Board, though businesses still face labour supply constraints. While wage pressures have decreased slightly, productivity has not improved, leading to high growth in unit labour costs.
The Board cautions that uncertainties persist regarding economic activity and inflation, particularly in relation to household consumption and the labour market. There are potential risks associated with slower-than-expected consumption growth or stronger-than-anticipated labour market performance. Additionally, uncertainty remains over the effects of monetary policy, firms' pricing, wages, and productivity outcomes under current labour market conditions.
Global uncertainties are significant, stemming from U.S. tariff announcements, geopolitical tensions, and potential retaliatory measures, influencing global confidence and expenditure patterns. Many central banks have eased monetary policies amidst the risks.
The Board's highest priority remains the sustainable return of inflation to target within a reasonable timeframe. The Board stated: "The continued decline in underlying inflation is welcome, but there are nevertheless risks on both sides and the Board is cautious about the outlook." Decisions will be guided by evolving data assessment, considering developments in the global economy, domestic demand, inflation, and the labour market.
"The Board is resolute in its determination to sustainably return inflation to target and will do what is necessary to achieve that outcome."