RBA interest rates: Central bank board holds rate at 4.35pc as inflation cools
The Reserve Bank has left official interest rates on hold after its first board meeting of 2024.
The bank, which reeled off 13 rate increases between May 2022 and November 2023, said on Tuesday that Australia’s cash rate would remain at 4.35 per cent.
The widely-expected decision came amid signs that inflation is cooling quicker than expected, despite high house prices and elevated utility charges.
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“While recent data indicate that inflation is easing, it remains high,” the bank said in a statement after the rate decision.
“The board expects that it will be some time yet before inflation is sustainably in the target range” of 2 per cent to 3 per cent.
“The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks, and a further increase in interest rates cannot be ruled out.”
The RBA also cited “a high level of uncertainty” around the outlook for the Chinese economy, which has a major bearing on Australia, and the implications of the conflicts in Ukraine and the Middle East.
“Domestically, there are uncertainties regarding the lags in the effect of monetary policy and how firms’ pricing decisions and wages will respond to the slower growth in the economy at a time of excess demand, and while the labour market remains tight,” it said.
“The outlook for household consumption also remains uncertain.”
Inflation slowed quicker than expected to 4.1 per cent in the December quarter, prompting traders to start modelling for the first of two forecast rates this year in September.
However, Tuesday’s commentary makes it clear that the bank wants to ensure that it sees off any threat of renewed growth in inflation before easing rates.
“Returning inflation to target within a reasonable timeframe remains the board’s highest priority,” the RBA said.
“This is consistent with the RBA’s mandate for price stability and full employment.
“The board needs to be confident that inflation is moving sustainably towards the target range. To date, medium-term inflation expectations have been consistent with the inflation target and it is important that this remains the case.”
