The RBA decided to maintain the cash rate at 4.10% and the interest rate on Exchange Settlement balances at 4.00%. This decision was influenced by a previous 4% increase in interest rates since May last year, aimed at balancing supply and demand in the economy. The Board chose to hold interest rates steady due to economic uncertainty, allowing time to assess the impact of previous rate hikes.
Inflation in Australia, although past its peak, remains high, particularly in service and fuel prices, and rent. The central forecast is for CPI inflation to decrease and return to the 2-3% target range by late 2025. The Australian economy showed stronger growth than expected in the first half of the year but still experiences below-trend growth, primarily due to high inflation impacting real incomes, weak household consumption, and dwelling investment. The unemployment rate is expected to gradually rise to around 4.5% late next year, while wages growth remains consistent with the inflation target.
The RBA's priority is to bring inflation back to the target range to avoid adverse economic effects. Recent data indicate a favourable trajectory for inflation, with a strong labour market and high capacity utilization. However, there are uncertainties, such as persistent services price inflation, the impact of monetary policy, and uncertain household consumption. The global economic outlook, especially regarding the Chinese economy, adds to these uncertainties.
The RBA suggests that further monetary policy tightening may be necessary to achieve the inflation target but emphasizes that decisions will depend on data and evolving risks. They will closely monitor global economic developments, household spending trends, and inflation and labour market outlooks. The Board remains committed to returning inflation to the target range and taking necessary actions to achieve this goal.
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