RBA Holds at 4.35%, Warns Hikes Still Possible
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- RBA held the cash rate at 4.35% in a unanimous decision, calling inflation "still too high" and leaving further hikes on the table to meet its price stability and full employment mandate.
- Australia's Q1 GDP expanded 2.5% year-on-year but grew just 0.3% quarter-on-quarter, missing the 0.5% Reuters poll forecast and decelerating sharply from 0.9% the prior quarter.
- April CPI came in at 4.2% year-on-year, well above the RBA's 2-3% target, with the bank noting fuel price increases are passing through to other goods and services.
- The Australian dollar fell 0.3% to 0.705 against the US dollar, and the S&P ASX/200 slipped marginally after the decision.
- The RBA cited Iran-related oil supply disruptions as a key factor keeping energy prices and inflation elevated, describing the geopolitical situation as "still at an early stage."
- The bank warned that "a period of prolonged uncertainty may also cause growth to be lower" in both Australia and its major trading partners.
Why it matters: Rate relief is off the table for Australian borrowers: the RBA held at 4.35% and explicitly left hikes open while inflation runs at 4.2%, well above the 2-3% target. With GDP growth already decelerating to 0.3% QoQ from 0.9% the prior quarter, the RBA is prioritizing fighting inflation over cushioning a slowing economy.
