The Reserve Bank of Australia (RBA) has kept interest rates at 4.35%, where it has remained for the past year.
The RBA’s target range for inflation is 2-3%. Recent data shows the annual rate of inflation at 2.8%.
The central bank noted inflation (rising prices) had “fallen substantially” since a 2022 peak, but warned the economic outlook “remains highly uncertain.”
The RBA said it doesn’t see inflation “sustainably returning to target” until mid-2026.
The RBA
The RBA is Australia’s central bank. Its key responsibility is setting the ‘cash rate‘ — an interest rate it charges commercial banks to borrow money.
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 by curbing spending. The current cash rate is 4.35%, up from 0.1% in May 2022.
Today’s decision
The RBA has kept interest rates at 4.35% for the eight consecutive time. The decision follows a two-day board meeting.
In a statement, the nine-member board said “underlying inflation remains too high”.
Underlying inflation measures the average basket of goods and removes price growth of “volatile” items, e.g. the price of fruits in season.
The RBA doesn’t expect annual inflation to continuously remain in the 2-3% target range until June, 2026.
Treasurer
Responding to the RBA decision during Parliament’s question time, Treasurer Jim Chalmers said the announcement was “not a surprise”.
“Inflation is back in the target band for the first time since 2021,” Chalmers said.
“We are confident, but not complacent, about a soft landing in our economy.”
