The Reserve Bank of Australia has left its key interest rate unchanged at 4.35% for the fifth consecutive board meeting, disappointing borrowers hoping for relief. The decision, widely expected by economists, comes as inflation remains above target and the economy shows signs of stalling.
In its statement, the bank noted that inflation is easing more slowly than previously expected and remains high. The board reiterated that it is not ruling anything in or out, leaving the door open for a potential rate rise if needed. The central bank predicts consumer price increases will accelerate in the current quarter before resuming their decline.
Mortgage holders on a typical A$600,000 loan are now paying around A$1,450 more per month since the RBA began its tightening 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.
The Australian economy has all but stalled at the start of the year, yet employment growth remains strong with the jobless rate hovering at about 4%. Additional relief from tax cuts and energy rebates will kick in from July, but the RBA is wary that increased spending could prompt a rate rise rather than a cut.
RBA Governor Michele Bullock confirmed that the board considered the case for a rate rise alongside holding steady. She described bringing down inflation as 'a slow grind' and noted that the narrow path to avoiding a recession appears to be getting narrower. Economists predict that the next move will be a rate cut, but not until the first quarter of 2025.
