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Reserve Bank of Australia holds cash rate at 4.35%

24 Sep '24
2 min read
Reserve Bank of Australia holds cash rate at 4.35%
Pic: eyeofpaul - stock.adobe.com

Insights

  • The Reserve Bank of Australia has held the cash rate at 4.35 per cent, citing persistent inflation, which remains above the 2-3 per cent target range.
  • Despite a drop in headline inflation, underlying inflation is still high, and forecasts suggest it will not return to target until 2026.
  • Economic growth remains weak, with labour market conditions tight.
The Reserve Bank of Australia (RBA) announced today that it will keep the cash rate target steady at 4.35 per cent, with the interest rate on Exchange Settlement balances remaining at 4.25 per cent. This decision reflects ongoing concerns about inflation, which, while lower than its peak in 2022, remains above the target range.

Inflation has seen a decline in recent months, with headline inflation dropping in July, aided by federal and state cost-of-living relief measures. However, underlying inflation, represented by the trimmed mean, was still 3.9 per cent over the year to the June quarter. The RBA's central forecast predicts that inflation will not sustainably return to the 2-3 per cent target range until 2026, the Reserve Bank Board said in a statement.

Economic growth remains sluggish, with GDP data confirming weak performance in the June quarter, largely due to ongoing restrictive financial conditions and reduced real disposable incomes. The labour market, while easing slightly, remains tight, with unemployment stabilising at 4.2 per cent in August.

The RBA emphasised the ongoing uncertainty in both the domestic and global outlook. While some central banks have begun easing monetary policy, the global economic landscape, particularly in China, remains a source of concern.

The RBA reiterated its commitment to bringing inflation back to target, stressing that monetary policy would remain restrictive until the Board is confident inflation is sustainably moving within the target range.

Fibre2Fashion News Desk (KD)

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