The Reserve Bank of Australia (RBA) has opted to keep its key policy interest rate unchanged at 4.35%, citing concerns that inflation may remain above target until 2026. The central bank expressed a growing confidence that inflation is moving sustainably towards its target, although underlying inflation currently hovers around 3.5%, which is notably higher than the 2.5% midpoint of the inflation target band of 2% to 3% annually.
In a prepared statement, the RBA acknowledged the pressing economic conditions shaped by the ongoing effects of the COVID-19 pandemic, which led to a peak inflation rate of 8.4% in December 2022, following fiscal and monetary easing measures. Since April 2022, the RBA has significantly raised its policy cash interest rate from a meager 0.10% to maintain a 13-year high at 4.35%.
While the RBA's higher interest rates are contributing to sluggish economic growth—illustrated by a meager 0.8% growth in output over the past year—there are indications that inflation may begin moderating, a sentiment echoed by ING Think, a division of the Dutch investment house. Observers suggest that potential monetary easing could commence in 2025, but caution that the RBA still views the economic outlook as uncertain and contingent upon upcoming consumer data..