RBA Holds Steady: Cash Rate at 4.35% Amidst Persistent Inflation and Economic Uncertainty
The Reserve Bank of Australia (RBA) has decided to maintain the cash rate target at 4.35% and the interest rate on Exchange Settlement balances at 4.25%.
Key points from the meeting include:
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Inflation: Despite a significant decrease from its peak in 2022, underlying inflation remains high at around 3.5%, above the RBA’s target midpoint of 2.5%. Forecasts suggest inflation won’t return sustainably to the target until 2026.
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Economic Growth: The economy has shown weak growth, with only a 0.8% increase in the year to the September quarter, the slowest pace outside the COVID-19 period since the early 1990s. Household consumption has been affected by declining real disposable income and restrictive financial conditions.
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Labour Market: The market remains tight, with unemployment at 4.1% in October, though there are signs of easing. Wage growth has unexpectedly slowed, but productivity growth is weak.
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Monetary Policy: The current policy is considered restrictive and is functioning as expected. Although some inflationary risks have diminished, demand still exceeds supply capacity, though this gap is narrowing.
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Future Outlook: There is uncertainty around consumption, labor market conditions, and the broader economic impact of monetary policy. Globally, while some central banks are easing policy, geopolitical risks remain.
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Policy Focus: The RBA prioritizes returning inflation to target levels to maintain price stability and full employment. They will continue to monitor global and domestic economic indicators closely to adjust policy as necessary.
See how this announcement affects residential, investment, commercial property and business lending here.
Future RBA Policy Announcements
A reminder that the schedule of RBA meetings has changed from 11 in a year to 8, held 5-7 weeks apart. Monetary Policy Announcements will be made at 2.30pm on the following days:
- February 4, 2025
- March 4, 2025
- April 1, 2025
- May 6, 2025
- June 3, 2025
- July 1, 2025
- August 5, 2025
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