The Reserve Bank of Australia (RBA) decided to keep interest rates at 4.35% during its May meeting.

There were discussions about a possible rate hike to address rising inflation, but the RBA opted against it.

Concerns were raised about slower-than-expected inflation and increasing price pressures, creating uncertainty about future rate changes.

The RBA is committed to achieving a 2-3% inflation target by 2026, with anticipated improvements in unemployment by mid-2025.

Despite government measures in the federal budget to support households, consumer sentiment remains low due to fears of high inflation.

The central bank is cautious about tightening monetary policy too quickly to avoid triggering an economic downturn.

Market expectations include a 50% chance of a rate cut by December and full pricing for a cut by April 2025.

ETFs such as EWA, FXA, and FLAU were affected by the RBA's decision, as the bank forecasts economic cooling and labor market deterioration to help meet inflation targets.