The Reserve Bank of Australia (RBA) has left rates unchanged at 4.35 per cent in September’s meeting.
In the meeting on 23–24 September, the board opted to hold rates for the seventh consecutive meeting as it believes the outlook is still “highly uncertain”.
In a statement, it said: “Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance. But inflation is still some way above the midpoint of the 2–3 per cent target range.
“Headline inflation is expected to fall further temporarily, as a result of federal and state cost of living relief. However, our current forecasts do not see inflation returning sustainably to target until 2026.
“Policy will need to be sufficiently restrictive until the board is confident that inflation is moving sustainably towards the target range.”
Since the RBA’s last meeting, the Federal Reserve has cut its rates by 50 basis points in a meeting on 18 September, its first rate cut in four years.
The RBA noted this move, saying: “There also remains a high level of uncertainty about the outlook abroad. Some central banks have eased policy, although they note that they are removing only some restrictiveness and remain alert to risks on both sides, namely weaker labour markets and stronger inflation.”
Reacting to the announcement, Harvey Bradley, portfolio manager at Insight Investment, said: “We continue to think that the RBA will be the last developed market, with the exception of Japan, to cut policy rates in this cycle. In part, this is because the RBA were more cautious than other central banks in the hiking cycle and did not take policy rates to as restrictive levels as peers.
“Our base case remains a first cut in six months’ time, followed by a further 50–75 bps in 2025 to take the policy rate towards a neutral level.”
Dwyfor Evans, head of APAC macro strategy at State Street Global Markets, said: “References to a highly uncertain outlook and not ruling any policy stance does not necessarily exclude another hike, but references to weaker growth indicate that the bias towards the next move will be to the downside, pending sustainably lower inflation.
“Put simply, the RBA will continue to sit on its hands and with only two more meetings in 2024. It is conceivable that rates remain on hold for the rest of the year, with a potential ease coming early in 2025 should trends prove supportive.”
There will be no meeting in October, so the next meeting will be held on 5 November.
