According to the latest data from the Australian Bureau of Statistics (ABS), headline inflation has decreased to 4.2%, a drop from the 4.6% recorded in March.
However, the Reserve Bank of Australia’s favored measure, which excludes volatile items, saw a slight increase in underlying inflation, reaching 3.4%, aligning closely with market expectations.
HSBC’s chief economist, Paul Bloxham, suggests that the RBA is unlikely to reduce interest rates this year. He advises the board to refrain from making cuts until they are certain inflation is under control, learning from past decisions in 2025 when rates were reduced three times following a decline in inflation.
Financial markets, along with most economists, anticipate the RBA will maintain the cash rate at 4.35% on Tuesday. However, there’s an estimated 50% chance of an additional rate hike in 2026.
Tony Sycamore, a market analyst at IG, noted that since the last meeting, fears about underlying inflation have lessened, economic growth has been sluggish, and the federal budget has further dampened sentiment.
With markets assured of a hold, attention would instead turn to the tone of the board’s accompanying statement and governor Michele Bullock’s press conference for any hints around the likelihood of further tightening, he said.
Sally Tindall, from financial comparison site Canstar, said whether more rate rises were likely was “anyone’s guess”.
“The data is quite volatile at the moment, and we’re sitting on a knife-edge where it could go one of two ways, and it’s really not clear which way it’ll go.”
— Arielle Richards, Australian Associated Press