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.

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