🗞️RBA Sticks to 4.35% Interest Rate, No Decision on Future Hikes

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The Reserve Bank of Australia decided to leave the cash rate target unchanged at 4.35 per cent and the interest rate paid on exchange settlement balances unchanged at 4.25 per cent.

In a statement, it said: 'Recent information suggests that inflation continues to moderate, but at a slower pace than expected. The CPI rose by 3.6 per cent in the year to the March quarter, down from 4.1 per cent in the year to December. Underlying inflation was higher than headline inflation and fell less. This was largely due to services inflation, which remains high and is only moderating gradually".

The following is audio from RBA Governor Michele Bullock's press conference :

What is going on in the economy?

Though it is decreasing more slowly than previously believed, inflation is still high. There is muted global growth and high inflation in many nations. Australia's economy is still growing slowly. Both the rate of inflation and the strength of the labour market have exceeded expectations. In general, consumers have reduced their spending as a result of rising interest rates. As a result, the economy is growing more slowly and supply and demand are better balanced. Though the state of the labour market has improved, unemployment is still low.

How do we see the economy developing?

Globally and locally, economic growth is anticipated to progressively accelerate.

This year's slow consumer spending and earlier interest rate increases are probably going to hinder economic growth. Growth is anticipated to progressively accelerate in 2025 as rising real incomes encourage rising household expenditure.

There will likely be more ease on the labour market.

The labour market's future is still unclear. Over the next few years, wages are expected to grow less quickly than previously predicted and unemployment is predicted to rise more gradually.

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Inflation is predicted to hit the target range of 2-3% in the second half of 2025.

Given the robust job market and rising cost of gasoline, inflation is predicted to be higher than previously anticipated in the near future. However, it is still anticipated that in the second half of 2025, inflation will return to the target range and reach the midpoint in 2026.

What did the Board decide?

The Board decided to keep the cash rate at its meeting in May. The Board anticipates that achieving sustained low and stable inflation will take some time. It's critical to maintain the current cash rate in order to lessen inflationary pressures. The goals of achieving target inflation and labour market levels that are consistent with full employment are supported by this decision. There will be a rough road ahead to bring inflation back on track. The Board is closely monitoring developments in Australia and overseas, but it is uncertain how interest rates will change going forward. The Board is not ruling anything out and is still alert to the possibility of sustained high inflation.

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