The Reserve Bank of Australia (RBA) has decided to keep the official cash rate on hold at 4.35 percent for the second consecutive month, following the board meeting on Feb. 6, 2024. This decision is consistent with the expectations of many economists and financial experts, reflecting the current economic conditions and recent drop in the official inflation rate.
According to the Australian Bureau of Statistics, the annual consumer price index (CPI) grew by 4.1 percent in the December 2023 quarter, down from 5.4 percent in the September quarter. This marks the fourth consecutive drop in the inflation rate, indicating a downward movement in the prices of goods and services. However, the central bank stated that inflation was still high, and the demand remained above the economy’s capacity to supply goods and services.
Despite Australia’s economy moving toward a better balance, the RBA foresees inflation to stay elevated for a while. They forecast a drop to around 3 percent by mid-2025 and further to 2.5 percent by 2026, recognizing the high level of uncertainty in the domestic and global economic outlook.
As a result, the RBA has stated that they will keep open the possibility of another interest rate hike in the near future, emphasizing that the path of interest rates will depend upon the evolving assessment of risks. They also mentioned that they will closely monitor developments in the global economy, trends in domestic demand, and the outlook for inflation and the labour market.