Reserve Bank of Australia holds interest cash rate at 4.35%
At its meeting today, the Board of the Reserve Bank of Australia decided to leave the cash rate target unchanged at 4.35 per cent, indicating stubbornness in the inflation to remain higher than the target forecast. In monetary policy, the board also decided to maintain the interest rate paid on Exchange Settlement balances at 4.25 percent, reflecting a cautious approach to financial conditions in the current economic environment.
What are the key points of today’s RBA Monetary Decision?
Inflation remains above target and is proving persistent.
The outlook remains highly uncertain.
Returning inflation to target is the priority.
Let’s delve deeper into more detail from each key point of the RBA Monetary Decision media release and see what the RBA has to say about what they might do in the future.
Inflation remains above target and is proving persistent.
Inflation remains above the midpoint of the 2-3 percent target range.
The trimmed mean shows that the CPI rose by 3.9 percent over the year to June
Inflation remains persistent, staying above the target midpoint for 11 straight quarters, with little change in quarterly underlying CPI inflation over the past year.
The outlook remains highly uncertain.
The latest SMP's central forecasts are for inflation to return to the target range of 2–3 per cent late in 2025 and approach the midpoint in 2026.
This is a slower return to target than expected in May, due to a larger gap between overall demand and supply in the economy. This change is partly due to a higher forecast for domestic demand, but also because the economy seems less able to meet that demand. This is reflected in ongoing inflation and a strong labour market.
Uncertainty about the global situation continues. The Chinese economy is weakening, affecting commodity prices. Some central banks have relaxed their policies but are cautious about ongoing inflation. Recently, financial markets worldwide have been unstable, and the Australian dollar has fallen in value. High geopolitical risks could impact supply chains.
Returning inflation to target is the priority.
“Returning inflation to target within a reasonable timeframe remains the Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment. To date, longer-term inflation expectations have been consistent with the inflation target and it is important that this remain the case.
Inflation in underlying terms remains too high, and the latest projections show that it will be some time yet before inflation is sustainably in the target range. Data have reinforced the need to remain vigilant to upside risks to inflation and the Board is not ruling anything in or out. Policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range.
The Board will rely upon the data and the evolving assessment of risks to guide its decisions. In doing so, it will continue to pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.”
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