The Reserve Bank of Australia (RBA) has announced it will keep interest rates on hold at 4.35%.
After its first meeting of the year, the RBA Board said there are “encouraging signs” inflation is slowing, but that the overall economic outlook was still uncertain.
For the first time, RBA Governor Michele Bullock will front a press conference in the next hour, where she’ll face questions about the Board’s decision.
It’s one of several changes to the RBA’s operations, as recommended in a recent independent review.
Reserve Bank
The RBA is Australia’s central bank. Its key responsibility is setting the ‘cash rate’ — an interest rate it charges commercial banks for short-term loans.
This rate influences the cost of borrowing across the economy, so changes to the cash rate are often called changes to ‘interest rates’.
The RBA has regularly raised interest rates over the last two years to fight rising prices (inflation). The current cash rate is 4.35%. It was 0.10% at the start of 2022.
RBA review
A formal review of the RBA was announced by Treasurer Jim Chalmers in July 2022.
The review found the RBA Board needed more specialist expertise, and that many members weren’t equipped to challenge the views of the Governor. Concerns were also raised about the RBA’s hierarchical culture and a lack of public transparency.
It offered 51 recommendations to the Board. Then-Governor Philip Lowe announced the RBA’s response in July. Lowe was replaced by Bullock – his former deputy – in September.
Changes to the RBA
The RBA Board will meet eight times each year to discuss the cash rate, rather than the previous 11.
The meetings will be longer, starting on Monday afternoon and ending on Tuesday morning.
Less frequent and longer meetings are intended to give Board members more time to consider proposed decisions and allow for greater consultation with staff.
RBA Board decision
As was the case after previous RBA meetings, each cash rate decision will be shared in a statement released on Tuesday afternoon.
However, the statement will no longer be attributed to the Governor, but the Board as a whole.
The RBA Board started their meeting yesterday and ended this morning. Their statement was released at 2:30pm (AEDT), and Bullock will speak to the press at 3:30pm.
Today’s meeting
Inflation fell to a two-year low at the end of 2023. While this doesn’t mean prices are falling, it means prices are increasing at a slower rate than they previously were.
In the lead-up to today’s meeting, leaders in Victoria, Queensland and Western Australia encouraged the Reserve Bank to consider reducing the cash rate at Tuesday’s meeting, to ease persisting cost-of-living pressures.