Interest rates left unchanged for another month
The Reserve Bank board will leave the cash rate unchanged for yet another month due to high levels of inflation that are falling “more gradually than expected”.
Reserve Bank governor Michele Bullock and the board. Photo: AAP
The official cash rate will be left at 4.35 per cent for another month, having been unchanged since November last year.
In a statement, the Reserve Bank of Australia (RBA) board said that while inflation continues to moderate, it is “falling more gradually than expected”.
As such, the RBA is reticent to change the cash rate, and noted that the Australian economic outlook “remains uncertain and recent data have demonstrated that the process of returning inflation to target is unlikely to be smooth”.
Economists tipped that the cash rate would be left unchanged, with the latest decision arriving just a week out from the federal government’s budget announcement.
Economists and the opposition have been warning Labor to keep its spending in check to avoid fanning the flames of inflation and putting pressure on the RBA.
In a larger statement on the nation’s economic state, the RBA said the decision to leave the rate unchanged would support inflation returning to target “within a reasonable timeframe”.
“Keeping the cash rate at the current level supports continued progress of inflation to the target and moderate growth in employment,” the RBA said.
“The path of inflation on its return to target is unlikely to be smooth. 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 RBA added that monetary policy tightening to date has “contributed to a noticeable slowing in the growth of demand over the past year”.
“Most of the increase in the cash rate since May 2022 has been passed on to borrowers. For households, this has led to a significant rise in the share of incomes used to meet debt payments, which, along with high inflation, has put pressure on household budgets,” the RBA said.
“Household credit growth has been subdued in the face of higher interest rates.
“Very weak household consumption growth has more than offset strong growth in business investment and public demand. Households have reduced their spending: saving has been higher than expected, which appears to be supported by the current high-interest-rate environment.”
