Reserve Bank of Australia keeps rates unchanged on mounting trade war risks

Reserve bank of Australia left its cash rate unchanged at 4.1%, in its policy meeting today, in line with market expectations.

The central bank decided to keep the rates on hold this time after 0.25% cut in February, the first policy easing in more than four years, pointing to growing risk of global trade war.

Policymakers said that monetary policy is well placed to respond to international developments, adding that they need firm signals that core inflation was under control before acting again.

However, today’s statement was slightly dovish, as the central bank dropped the references to being cautious about cutting rates again and that upside risks of inflation remain.

Governor Bullock highlighted that the board did not discuss a rate cut this time, and the slightly dovish turn in the statement did not open the door to an easing in May, pointing to persisting tightness in the labor market, that also contributed to decision to wait and get more information about labor market and inflation.