Reserve Bank of Australia maintains cash rate at 4.35%

19 Mar '24

2 min read

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Insights

RBA Board has maintained cash rate at 4.35 per cent to manage economic balance amid inflation concerns.
Recent data shows a slight decrease in inflation, but high domestic cost pressures persist.
RBA anticipates inflation aligning with its 2-3 per cent target by 2025, amid global and local uncertainties.
It is focused on stabilising inflation and employment.

The Reserve Bank of Australia’s (RBA) Board has opted to keep the cash rate target steady at 4.35 per cent, with the interest rate on Exchange Settlement balances remaining at 4.25 per cent. This decision arrives amidst ongoing efforts to strike a balance in the national economy, which is grappling with persistent inflationary pressures.

Recent data reveals a moderate easing in inflation, aligning with the RBA forecasts, yet the figures remain concerning. The headline monthly Consumer Price Index (CPI) indicator stabilised at 3.4 per cent annually up to January, reflecting a deceleration in goods inflation, while services inflation continues to moderate more slowly, the Reserve Bank Board said in a media release.

The economic landscape is marked by robust domestic cost pressures, encompassing both labour and non-labour components, which hint at enduring excess demand within the economy. Despite a slight increase in wages growth during the December quarter, there's an expectation of moderation in the coming year. However, the current wages growth is deemed sustainable with inflation targets, assuming productivity ascends to its long-term average.

The RBA notes that while inflation is on a downward trend, the economic future is laced with uncertainties. The final quarter's national accounts underscored a slowdown in growth, with household consumption particularly affected by the dual challenges of rising interest rates and inflation.

Looking ahead, inflation is projected to realign with the RBA's 2-3 per cent target range by 2025, with a return to the midpoint anticipated by 2026. Employment figures are expected to grow modestly, with a slight rise in unemployment and underutilisation rates foreseen.

Global economic factors, including service price inflation trends and uncertainties surrounding the Chinese economy and international conflicts, are also influencing the Australian economic outlook. Domestically, the impact of monetary policy adjustments and potential shifts in firm pricing and wage strategies remain key areas of focus.

The RBA underscores its commitment to reinstating inflation to the target range, aligning with its overarching mandate for price stability and full employment. The Board is poised to adapt its strategies based on emerging data and a comprehensive risk assessment, maintaining a vigilant stance on global and domestic economic developments.

Fibre2Fashion News Desk (KD)

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