Australia’s RBA unlikely to ease rates soon

The Reserve Bank of Australia (RBA) requires more time to ensure that inflation is decreasing before ruling out another interest rate hike, according to minutes of its February 5-6 Board meeting cited by Reuters on Tuesday.

The RBA considered raising rates at its February 5-6 Board meeting but decided to hold steady due to progress on inflation and a faster-than-expected loosening of the labour market.

The board agreed it was appropriate not to rule out a further increase in the cash rate given the uncertainty about the economic outlook and the high costs of inflation proving stubborn.

The RBA has raised interest rates by 425 basis points since May 2022 to 4.35 per cent to control inflation, leading to an easing in the job market and a slowdown in consumer spending.

The RBA expects inflation to return to the target range of 2-3 per cent in late 2025 and slow to the mid-point of 2.5 per cent in 2026. The Board deemed the forecasts, which assumed no further increase in the cash rate, were “acceptable”.

Markets expect a modest easing of 36 basis points for 2024, most likely in the second half of the year, with the first rate cut not seen likely until August or September.