Australia Holds Key Rate At 12-Year High

RTTNews | 25 days ago
Australia Holds Key Rate At 12-Year High

(RTTNews) - The Reserve Bank of Australia left its benchmark interest rates unchanged at a 12-year high for a fourth straight meeting, as widely expected, on Tuesday.

The policy board of the RBA, led by Governor Michele Bullock, decided to maintain the cash rate target at 4.35 percent.

The board also retained the interest rate paid on Exchange Settlement balances at 4.25 percent.

At the press conference, Bullock said rates are at the right level to get inflation back to the target. "Data are proving bumpy, we are taking a longer view," the governor said.

"The Board expects that it will be some time yet before inflation is sustainably in the target range and will remain vigilant to upside risks," the bank said in the statement.

"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 reiterated. The bank repeated that it will rely upon the data and the evolving assessment of risks.

The board observed that the economic outlook remains uncertain and recent data suggested that the process of bringing inflation back to the target is unlikely to be smooth.

Inflation is expected to return to the target of 2-3 percent in the second half of 2025. In the near-term, the bank forecast inflation to be higher because of the recent increase in domestic petrol prices and higher than expected service price inflation.

Nonetheless, inflation will decline over next year and 2026, the bank said. Capital Economics' economist Abhijit Surya said the RBA board seems keen on minimizing the collateral damage to the economy from its war on inflation.

The economist said rate cuts are a distant prospect. The bank will likely need to see several more months of soft economic data before it can take its foot off the brakes, he added.

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