RBA Announces February Rate Decision
After widespread speculation, the rate remains on hold.
After widespread speculation, the rate remains on hold.
The Reserve Bank has announced its decision to maintain the cash rate at its record low level of 0.1%.
The central bank has also decided to end its bond buying program with the last of its purchases to take place on February 10.
While the RBA previous said it was unlikely to raise the rate until its previously forecast timeline of 2024. However, with inflation targets the key driver in that decision. the speed up of inflation over September and December quarters has sparked speculation of a rate rise this year.
However, despite the rise, the central bank is looking for patterns of consumption to normalise according to Dr Philip Lowe, RBA Governor.
“One source of uncertainty is the persistence of the disruptions to supply chains and distribution networks and their ongoing effects on prices. It is also uncertain how consumption patterns will evolve and how this will affect the balance of supply and demand, and hence prices,” Dr Lowe said.
Previously, the RBA had set a target range of 2 o 3 per cent for inflation, as well as a minimum threshold of 3% for wages growth before it would raise rates.
However, while the trimmed man underlying annual inflation has reached 2.6%, the RBA maintains it is too early to ensure that it is stable enough to raise rates.
“It is too early to conclude that it is sustainably within the target band,” added Dr Lowe.
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The monthly consumer-price index indicator rose 3.4% in the 12 months to February
SYDNEY—Australia’s monthly inflation indicator came in below expectations in February, signalling that price pressures would likely continue to retreat over coming months.
The monthly consumer-price index indicator rose 3.4% in the 12 months to February, according to the latest data from the Australian Bureau of Statistics. Economists had expected a rise in February of 3.5% on year.
Some economists had expected the monthly CPI update to show a bigger rise, fuelled by services inflation which remains an area of concern for the Reserve Bank of Australia.
The better-than-expected inflation outcome will also help offset some of the uncertainty about the outlook for interest rates that arose in financial markets following news last week of a sharp drop in unemployment in February.
The most significant contributors to the February annual increase were housing costs, which climbed 4.6% on year, while food and nonalcoholic beverages rose 3.6% in the same period.
Alcohol and tobacco prices were up 6.1% and insurance and financial services rose 8.4%, the ABS said Wednesday.
Excluding volatile items from the data, the annual CPI rise in February was 3.9%, down from 4.1% in January.
Annual inflation excluding volatile items has continued to slow over the last 14 months from a high of 7.2% in December 2022, the ABS said.
Rents increased 7.6% for the year to February, up from 7.4% in January, reflecting a tight rental market and low vacancy rates across the country.
New dwelling prices rose 4.9% over the year with builders passing through higher costs for labor and materials. Annual new dwelling price increases have been around the 5% mark the past six months, the data showed.
The 3.6% rise in food prices in the 12 months to February was down from the 4.4% in January. It was the lowest annual growth since January 2022.
Insurance costs jumped 16.5% over the past 12 months to February, with rises in premiums across all insurance types due to higher reinsurance, natural disaster and claim costs, the ABS said.
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