RBA May Meeting Decision – Interest Rates Remain at 4.35%
Inflation persists at elevated levels, showing a slower decline than initially anticipated. Recent data indicates a gradual moderation in inflation, particularly in services, though it remains high overall. Despite this, domestic cost pressures remain elevated, and labor market conditions are not easing as much as predicted, indicating a tighter labor market than previously assumed.
The expectation is that higher interest rates will help align demand with supply. Current financial indicators and the gradual reduction in aggregate demand suggest that Australia’s monetary policy stance is presently restrictive. Demand growth is forecasted to be subdued throughout 2024, with employment growth expected to decelerate but remain positive. This adjustment should lead to inflation reaching the target range of 2–3 percent by the latter half of 2025 and hitting the midpoint in 2026.
To support the return of inflation to the target range, the cash rate target remains unchanged. The Reserve Bank Board, in its May 2024 meeting, opted to keep the cash rate steady. The Board anticipates that it will take some time before inflation stabilizes within the desired range. Thus, the primary focus remains on steering inflation back to target while promoting moderate employment growth by maintaining the current cash rate level.
Nevertheless, uncertainty looms over the economic outlook. The journey of inflation returning to target is expected to encounter bumps along the way. Determining the optimal interest rate path to ensure timely inflation recovery remains uncertain, and the Board is open to various possibilities. It will continue to monitor data closely and assess risks, staying alert to the possibility of inflation remaining persistently high.
2024 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:
• 7 May
• 18 June
• 6 August
• 24 September
• 5 November
• 10 December
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