The Reserve Bank of Australia has left its key interest rate unchanged at 4.35% for the fifth consecutive board meeting, maintaining the 12-year high while leaving the door open for a further rate rise if needed. The decision, widely expected by economists, was announced at the conclusion of a two-day meeting on Tuesday.
In its statement, the RBA acknowledged that inflation remains above target and is proving persistent. 'Inflation is easing but has been doing so more slowly than previously expected and it remains high,' the bank said. It repeated its mantra that the path of interest rates remains uncertain and the board is 'not ruling anything in or out,' leaving the option of another rate rise on the table.
Mortgage holders on a typical A$600,000 loan are paying around A$1,450 more each month since the central bank began its rate-raising cycle in May 2022, according to RateCity. The prospect of a rate cut before the end of 2024 has dimmed after inflation slowed less than expected in the March quarter, with the RBA predicting consumer price increases will accelerate in the current quarter before resuming their decline.
The stubborn inflation persists even as the Australian economy has all but stalled. However, employment growth has remained surprisingly strong, with the jobless rate hovering around 4%, helping households meet rising living costs. Relief is expected from 1 July when stage-three tax cuts and energy rebates come into effect, but the RBA will monitor whether extra spending becomes excessive, potentially prompting a rate rise rather than a cut.
RBA Governor Michele Bullock confirmed that the board considered both a rate rise and staying put. 'It's just going to be a slow grind to bring inflation down,' she said, adding that the bank still expects inflation to return to the 2–3% target band by the end of 2025. BDO economics partner Anders Magnusson predicted the next move would be a rate cut, but not until the first quarter of 2025.
