RBA Holds Key Rate At 12-Year High; Vigilant On Inflation
(RTTNews) - The Reserve Bank of Australia decided to leave its benchmark rate at a 12-year high for a fifth straight meeting and underscored that inflation is slowing more slowly than anticipated, leaving the door open for a possible rate hike. The policy board of the RBA, led by Governor Michele Bullock, retained the cash rate target at 4.35 percent.
The interest rate paid on Exchange Settlement balances was also kept unchanged at 4.25 percent.
Previously, the bank had changed the policy rate in November 2023, when it was lifted by a quarter-point to the current level.
Inflation is easing but has been doing so more slowly than previously expected and it remains high, policymakers observed. The board reinforced the need to remain vigilant to upside risks to inflation.
"The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out," the bank said.
The board said the momentum in economic activity is weak and the outlook is uncertain. The unemployment rate is rising and wage growth was slower-than-expected. The RBA discussed another rate hike and an upside surprise to the second quarter inflation could force its hand at the August meeting, Capital Economics' economist Marcel Thieliant said.
However, with easing capacity constraints and government rebate pushing inflation into the target band by the third quarter, the next move is likely to be rate cut rather than a hike, but that is unlikely to happen until early next year, the economist added.
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