RBA Hikes in Split Decision

• The RBA raised the cash rate 25bp to 4.10% in a narrow 5–4 vote, citing persistent inflation risks, capacity pressures and rising inflation expectations.
• The split decision highlighted uncertainty around the outlook, though the Board indicated further tightening remains possible depending on incoming data.
• Bond markets initially reacted dovishly, with 3yr yields falling from 4.61% to 4.54% and 10yrs from 5.00% to 4.92% after the announcement. Yields later rebounded following the Governor’s press conference, emphasising the debate was more about timing than direction of further hikes.
• Markets now price around a 55% chance of another hike in May, with roughly one additional move expected this cycle.
• In the US persistent domestic inflation pressures alongside a global energy shock, set against weaker labour market expectations, are likely to see the March FOMC policy decision hold steady