RBA leaves official interest rates on pause
Source: TND
The Reserve Bank has left official interest rates unchanged for the third meeting in a row.
The bank’s decision on Tuesday had been widely anticipated, amid forecasts borrowers will have to wait until at least late 2024 for any cuts.
The RBA announcement follows a two-day meeting discussing the overall state of the economy and progress on inflation, which at 4.1 per cent remains above the 2-3 per cent target range.
Earlier on Tuesday, a Reuters poll of economists found all 40 expected the official cash rate to stay on hold at 4.35 per cent in March.
While the decision was widely predicted, most focus has been on the tone the board will strike in its post-meeting statement and of governor Michele Bullock in the media conference afterwards for insights into the bank’s likely next move.
“Returning inflation to target within a reasonable timeframe remains the board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment,” the post-meeting statement said.
“The board needs to be confident that inflation is moving sustainably towards the target range. To date, medium-term inflation expectations have been consistent with the inflation target and it is important that this remains the case.
“While recent data indicate that inflation is easing, it remains high. The board expects that it will be some time yet before inflation is sustainably in the target range.”
At its previous meeting in February, the board kept its options open to hike further. Economists broadly agree the next move will be down, although there is no clear consensus on when the cuts will start.
“The board is not ruling anything in or out. The board will rely upon the data and the evolving assessment of risks,” Tuesday’s statement said.
“The board will continue to pay close attention to developments in the global economy, trends in domestic demand, and the outlook for inflation and the labour market. The board remains resolute in its determination to return inflation to target.”
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The big four banks are leaning towards cuts in the second half of 2024, with Commonwealth Bank and Westpac pencilling in a September start while NAB and ANZ forecast easing to begin in November.
ANZ head of Australian economics Adam Boyton said there was a risk cuts would start sooner than its base case as the latest data suggested inflation was cooling rapidly.
“That said, we think the Reserve Bank will be cautious in declaring victory against inflation and may prefer to wait until the annual change in inflation has come back within the band, which we expect in the September quarter 2024 for headline inflation,” he said.
Boyton said the RBA may wait to watch the consumer reaction to income tax cuts that kick in on July 1, as well as the influence of any additional spending in the May federal budget.
The RBA board does not meet again until May 6.
-with AAP