RBA

The RBA remains on hold with the cash rate kept at 4.35%. But the Board is gaining confidence in its own forecasts that inflation is coming down.

On Tuesday, the Reserve Bank of Australia's (RBA) meeting minutes showed that the current level of the cash rate best balanced the risks to inflation and the labour market. Given the considerable uncertainty about the economic outlook, each of the outcomes of rate cuts, leaving the current rate unchanged, and rate hikes were conceivable. The Board remained vigilant to upside risks to inflation.

While inflation has eased, the global economic outlook continues to be uncertain and vulnerabilities in the global financial system remain.

According to the latest data from the Australian Bureau of Statistics (ABS), Australia's Consumer Price Index (CPI) inflation rate slowed to its lowest level in three years in August, while core inflation fell to its lowest since early 2022, indicating that costs are cooling off gradually. 

The Reserve Bank of Australia (RBA) kept interest rates unchanged at 4.35 percent for the seventh consecutive meeting. In its monetary policy statement, the RBA retained its hawkish tone, emphasizing that no options are off the table in the fight against inflation. It underscored that policy needs to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range. 

On September 5, local time, Reserve Bank of Australia (RBA) Governor Bullock said she sought to reduce inflation in a reasonable timeframe and support employment. The policy will remain restrictive until inflation returns to the target range in a sustainable manner. There will be no rate cuts in the near term, and inflation needs to slow in real numbers before taking action.

Minutes of the Reserve Bank of Australia's (RBA) August meeting indicated that while the possibility of further rate hikes was discussed, the decision to keep the key interest rate at 4.35% was deemed more justified. Given the uncertainty around future consumption and the outlook for the labour market, members assessed that the risk of inflation not returning to target within a reasonable timeframe had increased, so holding the cash rate steady for an extended period would be appropriate.  

There has been further progress on inflation, but it has been very slow, said RBA Governor Bullock on August 16. The Board remains vigilant to upside risks to inflation. It is premature to be thinking about rate cuts.

As demand growth looks set to accelerate next year, the Board doesn't expect inflation to be back in the target range until the end of 2025. The Board will remain vigilant about upside risks to inflation and will not hesitate to raise interest rates when necessary.