Australia’s c. bank holds rates amidst slowing inflation

The Reserve Bank of Australia (RBA) maintained its cash rate target at 4.35 per cent and the interest rate paid on Exchange Settlement balances at 4.25 per cent, as per its statement on Tuesday.

Inflation has decreased significantly since its peak in 2022, with higher interest rates helping to balance aggregate demand and supply. However, inflation remains above the midpoint of the 2–3 per cent target range.

The trimmed mean inflation rate, a key indicator, stood at 3.9 per cent for the year to the June quarter, aligning with the bank’s May Statement on Monetary Policy forecast.

The RBA expects headline inflation to temporarily decline in the coming months due to various cost-of-living relief measures implemented by the federal and state governments. However, the central bank’s current projections indicate that inflation is unlikely to return to the target range until 2026.

Despite the recent slowdown in inflation, the RBA emphasised that underlying inflation has consistently exceeded the midpoint of the target range for the past 11 quarters, showing minimal progress in the past year.

Attribution: Reserve Bank of Australia’s statement

Subediting: M. S. Salama