The Reserve Bank of Australia (RBA) defended its decision to cut the official cash rate at its February meeting, while saying that it is too early to declare victory over inflation.

In a speech in Sydney on Wednesday, RBA deputy governor Andrew Hauser downplayed certain criticisms that the bank had rejected the staff forecasts by cutting the key rate to 4.10% last month. He said the bank's central projection implies that the labor market will remain relatively tight over its forecast period, and a little tighter than assumed in November 2024. He added that the bank is aware of the possibility that it may have overestimated the extent of excess demand in the labor market as suggested by recent inflation data.

"[W]e set monetary policy such that inflation is expected to return to the midpoint of the target range. And we do that because it maximizes the chances of inflation remaining sustainably in that range," Hauser said.

"The rate cut in February reduces the risks of inflation undershooting that midpoint, but the Board does not currently share the market's confidence that a sequence of further cuts will be required."

On trade, Hauser said that while Australia's direct exposure to US tariffs levied on its exports is limited, the country's link to the global supply chain could pose a bigger macroeconomic risk.