The Reserve Bank of Australia (RBA) Board has decided to leave the cash rate target unchanged at 4.35% and the interest rate on Exchange Settlement balances steady at 4.25%.
In a statement following its meeting today, the RBA highlighted the uncertain economic outlook, noting that the journey to bringing inflation back to target levels has been slow and uneven.
Since peaking in 2022, inflation has significantly decreased due to higher interest rates, which have worked to align aggregate demand and supply more closely. However, inflation remains above the midpoint of the 2 – 3% target range.
The latest central forecasts, as outlined in the RBA’s recent Statement on Monetary Policy (SMP), predict that inflation will return to the 2 – 3% target range by late 2025, reaching the midpoint in 2026. This represents a slightly slower trajectory than forecast in May, attributed to a larger-than-expected gap between aggregate demand and supply in the economy.
The RBA emphasised that its highest priority is to return inflation to target within a reasonable timeframe, consistent with its mandate for price stability and full employment. The Board noted that long-term inflation expectations have remained aligned with the inflation target, a trend that must continue to achieve its objectives.
