The Reserve Bank of Australia on Tuesday expectedly held its benchmark policy rate at 4.1%, despite having flagged earlier that inflation was declining at a faster pace than expected.

The country’s inflation reading in February came in at a softer-than-expected 2.4%.

The RBA said in its statement Tuesday that it had to be confident that this progress will continue “so that inflation returns to the midpoint of the target band on a sustainable basis.”

The central bank said it was “cautious” about its outlook, pointing out that recent U.S. tariff announcements were affecting confidence globally, highlighting that the impact would likely be amplified if tariffs widen, or other countries retaliate.

Speaking to CNBC’s “Street Signs Asia,” Paul Bloxham, HSBC’s chief economist for Australia and New Zealand, said the point that stood out in the statement was the central bank’s focus on global risks.

“When you look at things like they’re saying, the board has options … we don’t know what exactly is going to happen in terms of global trade developments and what they’re going to mean for Australia, but we’ve got options to deal with it because of where the economy is at,” Bloxham said.

The RBA also described geopolitical uncertainties as “pronounced,” and said this could have an adverse effect on global activity if households and firms delay expenditures to look for greater clarity.

Australia’s GDP grew at 1.3% year on year in the fourth quarter of 2024, beating expectations and marking its fastest growth in a year.

Inflation has stayed within the bank’s target range since August 2024, and prompted the RBA to cut rates in February.

Bloxham said this means that the economy is in a “reasonable place,” with full employment and inflation heading back to target.

RBA Governor Michelle Bullock said after the previous meeting “we cannot declare victory on inflation just yet. It is not good enough for inflation to be back in the target range temporarily. The Board needs to be confident that is returning to the target range sustainably.”

When asked if the February rate cut was a “one and done” decision, Bullock said the market was expecting about three more cuts on top of the February rate cut, but “our feeling at the moment is that that is far too confident.”

Australia’s government is currently in a caretaker mode, with Prime Minister Anthony Albanese on Friday calling a national election for May 3.