It will come as no surprise to most that the RBA is likely to keep interest rates on hold at 4.10% when the RBA next meets on Tuesday 1 April 2025.
The last thing the RBA wants to do is become involved in the political debate on the eve of a federal election. That’s why they likely cut interest rates at the Feb RBA meeting even though I believe they would have liked to have held off for a little longer and gathered more confirming data before cutting.
RBA Data Dependence
The RBA has always stated that movements in interest rates are going to be data dependant. The next RBA preferred measure of inflation—the quarterly consumer price index for the March quarter 2025—is released 30 April 2025
If the quarterly inflation data confirms that trimmed mean inflation is showing signs of consistently settling into the RBA’s 2% – 3% band then the possibility of another cut could be on the cards in the second half of 2025.
Trump’s Tariffs
However, how can anyone predict what is going to happen to Australia’s and the worlds interest rates and economics more broadly when Mr Trump is waging a tariff trade war on everything and every country in the world?
Will it lead to a blow-out in inflation, stagflation or a destruction in economic growth. No one knows! Everything is up in the air at the moment but I believe market trends will emerge and it will be important to remain nimble to them.
Election budget
The budget was essentially a ‘nothing’ budget geared towards re-election but it did highlight sizeable budget deficit’s for the next 2 years. Notwithstanding Australia is in the fortunate position to have relatively low levels of government debt as a % of GDP and still has a coveted AAA credit rating.
If the RBA does start to feel that it has inflation firmly back under control then other economic factors such as unemployment and economic growth will likely take on a more prominent role in their interest rate decision making.
Interest Rates on hold as election called
It will come as no surprise to most that the RBA is likely to keep interest rates on hold at 4.10% when the RBA next meets on Tuesday 1 April 2025.
The last thing the RBA wants to do is become involved in the political debate on the eve of a federal election. That’s why they likely cut interest rates at the Feb RBA meeting even though I believe they would have liked to have held off for a little longer and gathered more confirming data before cutting.
RBA Data Dependence
The RBA has always stated that movements in interest rates are going to be data dependant. The next RBA preferred measure of inflation—the quarterly consumer price index for the March quarter 2025—is released 30 April 2025
If the quarterly inflation data confirms that trimmed mean inflation is showing signs of consistently settling into the RBA’s 2% – 3% band then the possibility of another cut could be on the cards in the second half of 2025.
Trump’s Tariffs
However, how can anyone predict what is going to happen to Australia’s and the worlds interest rates and economics more broadly when Mr Trump is waging a tariff trade war on everything and every country in the world?
Will it lead to a blow-out in inflation, stagflation or a destruction in economic growth. No one knows! Everything is up in the air at the moment but I believe market trends will emerge and it will be important to remain nimble to them.
Election budget
The budget was essentially a ‘nothing’ budget geared towards re-election but it did highlight sizeable budget deficit’s for the next 2 years. Notwithstanding Australia is in the fortunate position to have relatively low levels of government debt as a % of GDP and still has a coveted AAA credit rating.
If the RBA does start to feel that it has inflation firmly back under control then other economic factors such as unemployment and economic growth will likely take on a more prominent role in their interest rate decision making.
Let’s see!
by Boris Sfiligoi
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