The Reserve Bank of Australia is widely expected to keep its cash rate unchanged at its next meeting, according to analysis from TD Securities, as softer consumer price index data and slowing domestic demand reduce the urgency for further monetary tightening.
Australia’s monthly CPI indicator for March came in at 3.5% year-on-year, below the consensus forecast of 3.6%, and marked the second consecutive month of softer-than-expected inflation readings. The data, released by the Australian Bureau of Statistics, showed a notable easing in core inflation, prompting TD Securities strategists to reassess the RBA’s policy trajectory. “The softer CPI data keeps the RBA sidelined, removing a key support for the Australian dollar,” the analysts wrote.
Domestic demand has also shown signs of moderation. Retail sales, housing credit, and business conditions have all eased in recent months, while the labor market—though still tight—has seen job vacancies decline from peak levels. TD Securities economists believe this demand-side softening gives the RBA room to maintain its current 4.35% cash rate without risking an overheating economy.
The Australian dollar weakened to around $0.6480 against the US dollar following the data release, and TD Securities maintains a cautious outlook on AUD/USD, expecting the pair to trade in a narrow range with downside risks prevailing. The firm’s view aligns with a growing consensus that the RBA has reached the peak of its tightening cycle, with the next move more likely to be a cut later in the year.
For Australian households and businesses, a steady cash rate means borrowing costs will not increase further in the near term. However, TD Securities cautions that the RBA is unlikely to cut rates soon, remaining vigilant against persistent inflation risks. The central bank is expected to remain data-dependent, watching upcoming employment and retail sales figures for further clues on the economy’s health.
