The Reserve Bank of Australia (RBA) chose to keep the cash rate target at 4.35 percent and maintain the interest rate on Exchange Settlement balances at 4.25 percent. This was a decision made during their meeting last 06 August 2024.

Inflation has significantly decreased from its peak in 2022, thanks to higher interest rates helping to balance aggregate demand and supply. However, it remains well above the midpoint of the 2–3 percent target range. The trimmed mean measure of underlying inflation showed a 3.9 percent increase in the Consumer Price Index (CPI) over the year ending in the June quarter. This aligns with forecasts from the May Statement on Monetary Policy (SMP). However, recent data indicates that inflation is still persistent. Underlying inflation has been above the target midpoint for 11 consecutive quarters, and quarterly underlying Consumer Price Index (CPI) inflation has barely changed over the past year.

This decision was widely anticipated by market analysts, especially after the latest quarterly consumer price index data revealed a 3.8% increase for the June 2024 quarter, as reported by the Australian Bureau of Statistics. While this marks a rise from the 3.6% increase observed in the March quarter, it aligns with the RBA’s expectations.

Recently, RBA Governor Michele Bullock highlighted that the economy remains challenging due to persistently high demand. She noted that the RBA is trying to manage the strong demand while acknowledging that monetary policy effects are delayed.

Bullock also pointed out that Australia isn’t experiencing the same progress in reducing inflation as seen in other economies.

Consequently, she stated that the economy is in a tough spot and the RBA will continue to be cautious.

Contact me if you’d like to discuss how the RBA’s decision impacts your situation.