Reserve Bank to decide on interest rates today

The Reserve Bank of Australia is expected to hold the current interest rate steady today, following the conclusion of its two-day meeting. This follows mortgage holders receiving their first cash rate cut in five years in February, but markets widely anticipate the RBA will maintain the rate at 4.10% in its announcement at 2:30 pm (AEDT).

Inflation data released last week showed that headline inflation had moved into the RBA's target band, raising hopes for further rate cuts. The monthly Consumer Price Index (CPI) released by the Australian Bureau of Statistics showed headline inflation easing to 2.4% in the 12 months to February, still well within the central bank's target range, and down from 2.5% the previous month.

However, other factors should ensure the RBA takes a cautious approach today. One such factor is US President Donald Trump's expected "Liberation Day" on Wednesday (Thursday AEDT), where he is expected to announce a fresh round of sweeping tariffs. Concerns that this could stoke inflation in the US and other countries, including Australia, and hamper economic growth have sent global stock markets lower.

Overnight on Wall Street, the S&P 500 fell 1.3%, after suffering one of its worst losses in years last Friday. The index is on track to fall 6.4% in the first three months of the year, which would be its worst quarterly performance in almost three years. Before last week's inflation data, economists were extremely skeptical about a rate cut today, with markets pricing in a 92% chance of the cash rate remaining at 4.10%.

Another factor for the RBA to consider is the current federal election campaign, with the central bank likely wanting to maintain a low profile before the May 3rd polling day. Some good news for mortgage holders is that economists are predicting a cash rate cut next month.