Reserve Bank of Australia Expected to Keep Interest Rates Steady Ahead of General Election and US Tariffs

The Reserve Bank of Australia (RBA) is expected to keep interest rates unchanged on the 1st (local time) ahead of the May general election and the U.S. announcement on reciprocal tariffs.

Michelle Bullock, Governor of the Reserve Bank of Australia (RBA). Photo by Reuters and Yonhap News.

On the 30th, Bloomberg reported that the RBA is expected to maintain the interest rate at 4.1% at the April monetary policy meeting. Previously, the RBA lowered the rate by 25 basis points (1bp = 0.01 percentage points) last month, marking its first rate cut in four years.

Experts predict that the RBA will take a cautious stance ahead of the U.S. reciprocal tariff announcement and the upcoming May general election. If reciprocal tariffs materialize, the Australian economy, which is sensitive to global economic activities and sentiment, is likely to be affected. Additionally, if both major parties competing in the election propose additional spending pledges, it could stimulate inflation.

Bloomberg pointed out that although Australia's current inflation is within the RBA's target range of 2-3%, clear evidence is needed for further rate cuts following last month's reduction. The U.S. Federal Reserve (Fed) also warned that tariffs could fuel inflation, indicating that additional rate cuts may not occur in the near future.

Lucy Ellis, Chief Economist at Westpac, a major Australian bank, said, "Cutting rates consecutively in February and April was probably never under consideration. The RBA spoke hawkishly last month and did not signal further rate cuts. Lowering rates at this April meeting could damage credibility."

Andrew Boak, Chief Economist at Goldman Sachs, stated, "After holding rates steady this time, the RBA will be able to gain visibility on fiscal policies set according to the election results and global trade outlook." Accordingly, Bloomberg noted, "May, when the RBA reviews quarterly inflation data and updates its internal economic forecasts, is a realistic time to discuss rate cuts."

Andrew Ticehurst, Strategist at Nomura Holdings, predicted that this RBA decision will be a "hawkish hold," adding, "RBA Governor Michelle Bullock is likely to push back against market expectations reflecting about 60 basis points of rate cuts by the end of this year."