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Bullock leaves cash rate unchanged

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What is the cash rate? The Reserve Bank chose to leave the cash rate unchanged on Tuesday – the last meeting of 2023.
What is the cash rate? 

The Reserve Bank of Australia (RBA) has kept the cash rate at 4.35% after its final meeting for 2023.

In a statement today, RBA Governor Michele Bullock said the slowing of inflation (rising prices) was a key influence supporting the decision.

Board members will next meet in February. It follows a 0.25% increase in November.

What is the cash rate?

The cash rate is what the RBA charges commercial banks for short-term loans. 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 were five cash rate rises in 2023.

Fighting inflation

The RBA uses the cash rate to combat inflation (rising prices) by discouraging spending.

Inflation peaked in December last year when prices rose by 8.4% over 12 months. This year, inflation has continued to rise, but at a slower pace.

Yearly inflation figures to October (4.9%) were the equal-lowest since July, but still above the 2-3% rate the RBA is seeking.

Bullock’s response

Bullock said that data up to October suggested inflation was “continuing to moderate”, but noted that it was still too high.

The cash rate will hold at 4.35% until at least February next year when the RBA board meets for its next monetary policy decision.

Any reduction to the cash rate isn’t expected until late next year or 2025.

When will they next meet?

From 2024, RBA meetings will be reduced to eight times a year, from 11. This will impact how many times the cash rate can be changed.

During an address at the Economic Society of Australia in July, then-RBA Governor Philip Lowe said longer, less frequent meetings would “provide more time for the Board to examine issues in detail and to have deeper discussions on monetary policy strategy”.

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