RBA Maintains Steady Interest Rates, Reaffirms Commitment to Reducing Inflation

The Reserve Bank of Australia (RBA) decided to maintain interest rates on Tuesday, reaffirming its commitment to reducing inflation, which it still considers to be too high.

For the seventh consecutive meeting, the RBA kept the official cash rate steady at 4.35%, a move that was widely anticipated. Although headline consumer price index (CPI) inflation has eased, the central bank indicated that underlying inflation remains “too high” based on its criteria.

The RBA noted that longer-term inflation expectations are still within its forecasts and emphasized the importance of keeping it that way. While inflation is anticipated to decrease in the short term due to government support, the RBA does not expect prices to return “sustainably” to its target range until 2026.

The central bank refrained from providing explicit guidance on potential interest rate hikes in the near future, stating it remains vigilant regarding any upward risks to inflation and is not ruling out any possibilities.

“The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome,” the RBA stated.

Recent data indicated that CPI inflation remains elevated, with Australia experiencing notable job market growth for five consecutive months. While these conditions suggest resilience in the Australian economy, they also point to persistent inflation in the near-term.

Governor Michele Bullock has cautioned in recent months that persistent inflation could lead to additional rate hikes. Analysts at ANZ predict that the RBA will maintain steady rates at least until the first quarter of 2025, with any plans to cut rates likely delayed due to stubborn inflation and a strong labor market.

Upcoming monthly CPI data is expected to show that inflation fell within the RBA’s target range of 2% to 3%, although underlying inflation is likely to remain high.

Following the RBA’s statement, the Australian dollar saw a slight increase, while the ASX 200 stock index remained in negative territory. The RBA stands out among global central banks with a relatively hawkish outlook on rates, even as others like the Federal Reserve start to lower interest rates.