Australia holds rates at 12-year high

Australia’s central bank kept interest rates at a 12-year high of 4.35 per cent for the sixth consecutive meeting as it waited for inflation to ease before considering rate cuts.

The Reserve Bank of Australia (RBA) reiterated its commitment to maintain restrictive policies until inflation moves consistently towards its target range.

The Australian dollar rose slightly following the decision, and Governor Michele Bullock is scheduled to address the media at 3:30 pm Sydney time.

The decision comes after recent data showed a slowdown in core inflation in the second quarter, prompting some global central banks to reduce rates or signal plans to do so.

Despite these trends, the RBA upgraded its forecasts for core inflation and economic growth, citing stronger demand. Core inflation is expected to ease to 3.5 per cent by year-end and 3.1 per cent by mid-2025.

Governor Bullock emphasised the need for confidence in sustainably returning price growth to the bank’s goal. While inflation figures have provided some relief, core prices remain high, driven by expenses such as insurance, education, and housing rent.

Australia’s cautious stance contrasts with global trends, where the Bank of Canada, European Central Bank, and Bank of England have reduced rates, and the Federal Reserve is expected to follow suit in September.

The RBA noted global market volatility and geopolitical uncertainties, which could impact supply chains. Additionally, the effects of recent income-tax cuts and cost-of-living rebates on inflation forecasts remain uncertain.

Attribution: Bloomberg