The RBA’s streak of 10 consecutive rate hikes has come to an end, with the bank hitting the pause button on further rises — for now.
The decision to retain RBA’s key cash rate at 3.6 per cent in April comes following the central bank’s monthly meeting on Tuesday.
It offers some immediate relief for Aussie consumers, who have experienced steady rises every month since last May, back when rates were at a record low of 0.1 per cent.
However, RBA Governor Phillip Lowe has warned that the door remains ajar to further rate rises in the near future if inflation continues to rise.
“The board expects that some further tightening of monetary policy may well be needed to ensure that inflation returns to target,” Mr Lowe said.
“The decision to hold interest rates steady this month provides the board with more time to assess the state of the economy and the outlook in an environment of considerable uncertainty.”
To pause or not to pause
Despite many experts predicting a pause at RBA’s meeting this week, others were not so sure amid the banking crisis and the announcement of further cuts by OPEC+ oil producers on Monday.
While the money markets were suggesting that as early as last week a 100 per cent pause was likely, City Index Senior Market Analyst Matt Simpson said a pause wasn’t a shoo-in.
“So the pause versus hike debate is much closer to a 50-50 than market pricing implies, and the underlying message of their statement is arguably more important than the act of hiking or pausing itself,” Mr Simpson said.
Following the Reserve Bank’s decision, Mr Simspson now believes that another hike is likely in the future but insists there was a noticeable difference in the RBA’s dialogue following the latest meeting.
“In reality, there’s a decent chance we’ll get another hike, but they seem content that inflation has peaked and opted to ‘not’ pull the hiking trigger ahead of the quarterly inflation report in a few weeks,” he said.
“The RBA concede that monetary policy ‘may’ need to be tightened, whereas previously it said policy ‘will’ need to be tightened.”
While consumers across the country can breathe a sigh of relief, the key takeaway is that the door is definitely not shut to further rate rises if inflation continues.