Reserve Bank Board Maintains Cash Rate Amid High Inflation

Highlights:

• Reserve Bank Board maintains cash rate at 4.35% amid persistently high inflation.
• Economic uncertainty prevails as excess demand and strong domestic cost pressures persist.
• Board prioritizes returning inflation to target, closely monitoring data and global economic trends to adapt monetary policy as needed.

At its recent meeting, the Reserve Bank Board opted to keep the cash rate target steady at 4.35 per cent, alongside maintaining the interest rate on Exchange Settlement balances at 4.25 per cent. Despite expectations of a decline, inflation remains elevated, with the Consumer Price Index (CPI) growing by 3.6 per cent over the year to March, only slightly down from 4.1 per cent in the previous quarter.

Economic Uncertainty Persists

Amidst efforts to balance aggregate demand and supply, the economy continues to grapple with excess demand and robust domestic cost pressures, especially in labor and nonlabor inputs. Although the labor market has eased somewhat, it remains tighter than conducive to sustained full employment and target inflation.

Outlook and Challenges

The economic outlook remains uncertain, with inflation expected to return to the target range of 2–3 per cent by the second half of 2025. However, uncertainties persist, particularly regarding the trajectory of services inflation and household consumption. Real incomes have stabilized, but there's a risk of slower-than-expected consumption growth.

Prioritizing Inflation Target

The Board reiterates its commitment to returning inflation to target within a reasonable timeframe, closely monitoring data and global economic trends. Medium-term inflation expectations align with the target, but the path to achieving it remains uncertain. The Board emphasizes its readiness to adapt monetary policy as needed to ensure sustainable inflation.

Customer Notice:

Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.

Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com