Australia’s central bank left its benchmark interest rate unchanged for the third straight meeting as inflation is expected to return to the target in a reasonable time.
At the final board meeting of Philip Lowe as governor, the policy board decided to hold the cash rate target at 4.10 percent. The decision matched economists’ expectations.
The interest rate paid on Exchange Settlement balances was kept unchanged at 4.00 percent.
The RBA has raised the key rate by 4 percentage points since May last year. The board observed that the higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so.
Today’s decision to retain the rate will provide further time to assess the impact of past tightening and the economic outlook.
The bank expects inflation to return to the 2-3 percent target range in late 2025. The economy is forecast to continue to grow below-trend for a while.
The board noted significant uncertainties around the outlook. Service price inflation remained persistently high overseas and the same could occur in Australia.
The outlook for household consumption remains uncertain. Globally, there was increased uncertainty around the outlook for the Chinese economy due to ongoing stress in the property market, Lowe said.
Lowe said some further tightening of monetary policy may be required to ensure that inflation return to target in a reasonable timeframe. Nonetheless, future action will continue to depend upon the data and the evolving assessment of risks, the governor added.
The central bank’s next move will be a rate cut, perhaps as early as the first quarter of 2024, Capital Economics’ economist Marcel Thieliant said.
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