The Reserve Bank of Australia (RBA) has maintained its benchmark interest rate at 4.35% for the eighth consecutive meeting, aligning with economists’ forecasts from Reuters. Despite a more cautious approach seen in other developed economies, the RBA highlighted in its statement a significant decrease in inflation levels since the peak in 2022.
However, it noted that underlying inflation remains elevated.
The RBA’s projections indicate that inflation is not expected to reach the midpoint of its 2%-3% target range until 2026. Headline inflation in Australia decreased to 2.8% in the third quarter from 3.8% in the previous quarter, primarily due to declines in fuel and electricity prices.
The central bank acknowledged that part of this decrease is temporary, associated with relief measures for the cost of living, and anticipates a rebound in the headline rate once these measures expire.
The focus shifts to the trimmed mean underlying inflation rate, which stood at 3.5% in the September quarter, signaling a notable deviation from the 2.5% midpoint of the inflation target.
The RBA emphasized the prevailing high uncertainty and outlined scenarios where labor market conditions and productivity growth could impact the inflation trajectory. It suggested that the pace at which household spending increases may influence the time it takes for inflation to reach the target level.
Additionally, the RBA highlighted external factors, including heightened geopolitical risks and potential alterations in global trade and fiscal policies, contributing to the overall uncertainty in the economic outlook.
