The Reserve Bank has left interest rates on hold at 3.60%

The Reserve Bank of Australia (RBA) has voted unanimously to leave the cash rate unchanged at 3.60%.

It is the RBA’s third decision in a row to leave the rate the same, following a series of cuts.

Last week, the Australian Bureau of Statistics (ABS) announced the highest rate of inflation in more than a year.

Here’s what you need to know.

Context

The RBA is Australia’s central bank. It has two goals:

• Price stability: The rate of inflation stays around 2-3%.
• Full employment: Everyone who wants a job can get a job.

The RBA board uses the cash rate – what it charges banks for short-term loans – as a tool to achieve these goals.

We usually refer to changes in the cash rate as the RBA changing interest rates, because it affects rates across the economy, including home loans.

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The higher the interest rate, the more expensive it is to borrow money.

The RBA board forecasts where they think inflation and employment are headed, and sets the cash rate to make sure they head towards their goals.

Decision

Since the last RBA meeting in October, ABS data shows inflation and unemployment have risen.

The RBA noted ‘trimmed mean’ inflation was at 3% in September — higher than it had predicted it would be, and at the top of its target band (2-3%).

The trimmed mean is often seen as a more accurate picture of how inflation is tracking. This is because it excludes volatile prices, such as petrol, to better understand longer-term changes in prices.

Last month, the unemployment rate – the percentage of people who looked for work and couldn’t find any – reached a four-year high.

The RBA noted this milestone, adding that “job vacancies are still at a high level” and many companies “are experiencing difficulty sourcing labour.”

Given both increases, the RBA said the board had decided “it was appropriate to remain cautious” in its decision-making.

It voted unanimously to keep the cash rate on hold.