Australia’s central bank kept key interest rates unchanged for the ninth straight session on Tuesday, but today’s statement raised hopes for an early rate cut.
The Reserve Bank of Australia’s policy board, governed by Michael Bullock, decided to keep the cash rate target at a 13-year high of 4.35 percent and the decision was in line with expectations.
The previous interest rate change was in November 2023, when it was raised by 25 basis points to the highest level since late 2011.
The interest rate paid on exchange settlement balances was maintained at 4.25 percent.
The Council said that it is gaining some confidence that inflation is moving sustainably towards the target, stressing that it will continue to rely on data and advanced risk assessment to guide its decisions.
“The Board remains firm in its determination to bring inflation back on target and will do what is necessary to achieve this outcome,” the bank said.
Policymakers noted a risk that any recovery in consumption would be slower than expected, leading to continued weak output growth and a sharp deterioration in the labor market.
Economist Marcel Thiliant of Capital Economics said the first rate cut would not come until the bank’s meeting in May, expecting only 75 basis points cumulative of easing.
The economist noted that the Reserve Bank of Australia would want to see further easing of restrictions on the labor market before cutting interest rates.
