24/09/2024
In a highly anticipated announcement, the Reserve Bank of Australia (RBA) has confirmed its decision to keep the official cash rate steady at 4.35% for the seventh consecutive meeting. This decision, made on September 24, underscores the central bank’s ongoing commitment to controlling inflation while being mindful of the economic landscape.
RBA’s Commitment to Inflation Control
RBA Governor Michele Bullock emphasised that sustainably returning inflation to the target range remains the board’s highest priority. In her statement, she highlighted that while headline inflation may temporarily decline, underlying inflation—which is a better indicator of inflation momentum—continues to be too high. Bullock noted that current projections suggest inflation will not return to the RBA’s target range of 2-3% until at least 2026.
“The board will continue to rely on data and evolving risk assessments to guide its decisions,” Bullock stated, indicating a cautious yet flexible approach in the face of ongoing economic challenges.
Economic Landscape and Inflation Projections
Recent data from the Australian Bureau of Statistics revealed that inflation rose by 3.5% over the year ending in July 2024, with underlying inflation at 3.7%. The upcoming CPI figures for August, set to be released on September 25, are expected to provide further insights into the current inflation trajectory.
Despite some analysts suggesting that Australia may have reached the peak of its recent rate-hiking cycle, expectations for a rate cut in the near term have been tempered by persistent inflationary pressures. Major banks, including Commonwealth Bank, NAB, Westpac, and ANZ, have adjusted their forecasts, with most predicting that any potential rate cuts will not occur until early 2024 or later.
Political Implications and Reactions
In a political twist, the Australian Greens proposed leveraging the government’s influence to push for a cash rate reduction. They indicated willingness to support the government’s proposed RBA reforms in exchange for a rate cut. However, Finance Minister Katy Gallagher firmly rejected this approach, calling it “economically irresponsible.”
The RBA’s next cash rate decision is scheduled for November 5, marking one year since the last rate adjustment. The central bank remains vigilant, closely monitoring both domestic and global economic developments.
