Australia’s central bank maintains tightening bias despite Q1 GDP missing forecasts, fueling market skepticism over rate hike prospects.
The Reserve Bank of Australia’s hawkish rhetoric is colliding with slowing economic momentum after first-quarter GDP rose just 0.3% quarter-on-quarter, undershooting expectations. Annual growth decelerated to 2.5%, down from stronger prints in late 2023, complicating the RBA’s inflation fight.
Markets had anticipated a modest slowdown but not the sharp deceleration in domestic demand. The RBA continues to signal potential rate hikes, citing sticky inflation near the top of its 2-3% target band, though softer data weakens the case for further tightening.
Trade figures offered little relief, with a surplus driven by weak import demand rather than export strength. Imports rose just 0.8% month-on-month, a sharp drop from prior gains, reinforcing signs of cooling household and business activity.