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RBA keeps cash rate at 4.1% for the fourth month in a row

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The Reserve Bank of Australia (RBA) has kept the cash rate unchanged at 4.1% for a fourth consecutive month.
rba cash rate 4.1%

The Reserve Bank of Australia (RBA) has kept the cash rate unchanged at 4.1% for a fourth consecutive month.

It marks the first RBA cash rate decision under the leadership of new governor, Michele Bullock.

She replaced Philip Lowe last month.

Bullock warned that inflation was “still too high”, but didn’t rule out future rate rises.

The cash rate

The cash rate is what the RBA charges commercial banks for short-term loans and it flows through to other interest rates across the economy (so it’s often referred to as ‘increasing interest rates’).

There were 10 consecutive rate rises from May 2022 to March 2023, as the RBA moved to combat inflation (rising prices) by discouraging spending.

There have been just two rises since April.

Fighting inflation

Inflation has generally been slowing in Australia. It peaked in December last year, when prices rose by 8.4% over the previous 12 months.

The inflation rate was 5.2% in August. This was a slight rise from the previous month’s figures (4.9%), though still well below rates seen in 2022.

Why hold again?

Bullock cited the slowing inflation figures as a factor in the RBA board’s decision to keep the cash rate unchanged at 4.1%.

She also said that current economic uncertainty played a role in the continued pause. Keeping the cash rate paused would provide the Board “further time” to understand the impacts of previous rises to the cash rate on the economy.

Future RBA cash rate decisions

Any reduction to the cash rate is unlikely this year. It’s largely expected the cash rate won’t fall until next year, with possible reductions forecast by some economists not to occur until as late as 2025.

Bullock said that further rate rises “may be required” to combat inflation, but that this would be determined by new data and risks in the economy.

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