Reserve Bank of Australia's pause to continue in April

The Reserve Bank of Australia (RBA) is likely to keep its cash rate on hold at 4.75% on Tuesday. Natural disasters, both local and overseas, have created an element of uncertainty and will probably discourage the central bank from raising rates for some time. Nonetheless, business investment is set to surge and spare capacity in the economy is already low. We therefore expect the RBA to resume its policy tightening in the second half of the year and eventually to raise the cash rate by more than the markets anticipate.