The Reserve Bank of Australia (RBA) Board has left the cash rate unchanged at 4.35%, following a decision at today’s meeting.
Although the RBA says inflation has fallen substantially since its peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance, the economic outlook remains uncertain.
In a statement, the RBA said recent data has demonstrated that the process of returning inflation to target is unlikely to be smooth.
The central forecasts published in May were for inflation to return to the target range of 2 – 3 per cent in the second half of 2025 and to the midpoint in 2026.
Since then, there have been indications that momentum in economic activity is weak, including slow GDP growth, a rise in the unemployment rate and slower-than-expected wage growth.
“We still think we’re on the narrow path, it does appear to be going a bit narrower,” said RBA Governor Michelle Bullock.
“We need a lot to go our way if we’re going to bring inflation back to the 2 – 3% target range.
“The board does need to be confident inflation is moving sustainably towards the target, and it will do what is necessary to achieve that outcome.
“The board did discuss the case for increasing interest rates at this meeting. In the end, it decided its current strategy of staying the course and trying to bring inflation back down by bringing supply back to demand was the way back to go”, Ms Bullock added.
The RBA says returning inflation to target within a reasonable timeframe remains the Board’s highest priority.
The next meeting of the RBA board will be held on 6 August 2024.
