RBA interest rates: Central bank holds the line in fight against inflation with yet another pause on rates
The Reserve Bank has held Australia’s benchmark interest rate at 4.35 per cent, staring down political pressure for a cut and warning that the inflation fight remains top priority.
The cash rate has remained at that level since November 2023.
But inflation has been stuck above the RBA’s target zone and unemployment is still below the long-term sustainable level which would help keep rising prices under control. Almost 48,000 jobs were created in August.
That’s despite a slowdown of economic activity, which has been close to the lowest level in decades.
The RBA repeated its position that “sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority”.
“While headline inflation will decline for a time, underlying inflation is more indicative of inflation momentum, and it remains too high,” the bank said — rebuking Government power credits and other moves designed to temporarily lower the inflation read.
Underlying inflation won’t return sustainably to target until 2026, the RBA forecasts.
On Monday night, money markets were tipping just a one-in-10 chance of a cut in September, and a Bloomberg survey of economists found that most expected rates to stay unchanged for the rest of the year.
The central bank came under attack in recent weeks from Federal Treasurer Jim Chalmers for “smashing the economy” and from his predecessor Wayne Swan for “punching itself in the face”.
But Dr Chalmers had been under fire for huge spending growth which has added to inflation pressure.
The Greens have refused to support Dr Chalmers’ proposed RBA reforms unless he intervenes to lower interest rates — with warnings that will shred the central bank’s independence and risk prices surging again.
More to come.
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