Rates on hold as RBA Board keeps a watch on inflation
The Board presses pause on another rate hike for the third consecutive month
The Board presses pause on another rate hike for the third consecutive month
Interest rates will remain on hold for another month, the RBA Board announced today.
In a statement released by Dr Philip Lowe – his last as governor of the RBA – he said the current 4.1 percent interest rate is creating ‘a more sustainable balance’ between economic supply and demand.
“In light of this and the uncertainty surrounding the economic outlook, the Board again decided to hold interest rates steady this month,” Dr Lowe said. “This will provide further time to assess the impact of the increase in interest rates to date and the economic outlook.”
The news was widely expected among economists and the major banks following the announcement that the rate of inflation had fallen to 4.9 percent in July, down from 5.4 percent in June.
Dr Lowe said inflation had passed its peak but it was still too high.
“While goods price inflation has eased, the prices of many services are rising briskly,” he said. “Rent inflation is also elevated. The central forecast is for CPI inflation to continue to decline and to be back within the 2–3 percent target range in late 2025.”
CoreLogic research director Tim Lawless said rents would most likely continue to put pressure on inflation for some time yet.
“CPI rents, which are allocated the second largest weighting within the CPI ‘basket’, remain a major inflationary driver, with the monthly CPI indicator reporting a 7.6 percent rise in the cost of rents in the year to July, accelerating from 7.3 percent in June.
“The trend indicates no slowdown in growth for rents paid.”
Acknowledging the two speed economy, Dr Lowe said some Australians were feeling the financial pinch of elevated interest rates more than others.
“The outlook for household consumption also remains uncertain, with many households experiencing a painful squeeze on their finances, while some are benefiting from rising housing prices, substantial savings buffers and higher interest income,” he said.
However, he did not rule out further rate increases.
“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks,” he said. “In making its decisions, the Board will continue to pay close attention to developments in the global economy, trends in household spending, and the outlook for inflation and the labour market.
“The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.”
Dr Lowe will step down as governor in two weeks’ time. He will be succeeded by Michele Bullock.
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