The Reserve Bank of Australia (RBA) announced on Tuesday that it would keep its cash target rate steady at 4.35 percent. This decision comes exactly one year after the board last raised rates by 0.25 percentage points in November 2023, marking a period of stability in the bank’s approach to tackling inflation.
According to the Australian Broadcasting Corporation (ABC), economists widely anticipated the decision, reflecting consensus that current economic conditions warranted a hold on further rate increases. The RBA’s statement highlighted the ongoing challenges with inflation, noting that while headline inflation has decreased significantly since 2022, underlying inflation remains stubbornly high at 3.5 percent.
“Although headline inflation has seen a considerable decline and is expected to remain lower for the foreseeable future, underlying inflation continues to be a strong indicator of persistent inflationary pressures,” the RBA explained in its statement. Headline inflation data, released in late October, showed that annual inflation had dropped to 2.8 percent for the 12 months ending in September— the first time it has fallen within the RBA’s target range of 2-3 percent since 2021.
The central bank remains cautiously optimistic that inflation will eventually stabilize. The board anticipates that underlying inflation will return to the preferred 2-3 percent range sometime between mid to late 2025. Despite the downward trend in headline inflation, the RBA’s focus on underlying inflation suggests it is keeping a close eye on the overall economic momentum and wants to ensure that inflationary pressures do not resurface.
Treasurer Jim Chalmers commented on the decision through social media, affirming that it aligned with expectations and reflects a careful balance in managing economic growth and inflation. Chalmers acknowledged the importance of this steady approach in supporting households and businesses across Australia as the economy adapts to current conditions.
The RBA’s next board meeting is scheduled for December, where it will reassess the economic outlook and the appropriateness of the cash rate setting. For now, the board appears committed to keeping a steady course, cautiously monitoring inflation trends while maintaining flexibility for potential future adjustments.
