No Change for Rates as Reserve Bank Stays Course

Australia’s official cash rate has been held at 4.35 per cent by the RBA for the seventh consecutive time.

The central bank, at its fifth meeting of the year, said it would stay the course to lowering inflation to the target of 2-3 per cent, keeping the rate at its 12-year high.

“The most recent projections in the August Statement on Monetary Policy show that it will be some time yet before inflation is sustainably in the target range,” the board said.

“Data since then have reinforced the need to remain vigilant to upside risks to inflation and the board is not ruling anything in or out.

“Policy will need to be sufficiently restrictive until the board is confident that inflation is moving sustainably towards the target range.”

PropTrack senior economist Eleanor Creagh said the Reserve Bank decision had come amid ongoing elevated price pressures.

“Households are under pressure and retail sales and consumption are weak, while consumer sentiment remains low,” Creagh said.

“Though employment growth has remained strong, and the unemployment rate held steady at 4.2 per cent in August, the labour market has softened over the past year.

“Despite recent data showing the economy is tracking through a period of weak growth, the sustained pause reflects the RBA’s desire to keep inflation on its path back to target, while balancing downside risks for growth and the labour market.”

Creagh said home price growth had persisted despite higher interest rates, with the PropTrack Home Price Index indicating national home prices hit a fresh record in August.

“Prices have now cycled through 20 consecutive months of growth, although performance differs significantly around the country.

“Home prices are expected to rise in the period ahead as activity ramps up into the spring selling season.

“However, the expected uplift in choice, the uncertainty around timing of interest rate cuts and affordability constraints are likely to reduce the pace of price growth.”

CoreLogic research director Tim Lawless said the hold decision should be seen as a positive outcome from the central bank. 

“The decision implies the RBA is satisfied with the gradual downward trajectory of inflation, although the bank doesn’t expect core inflation to reach the top end of the 2 to 3 per cent target range until late next year and remains cautious about ‘sticky’ elements of inflation including services,” Lawless said. 

“Although headline inflation is reducing more visibly thanks to the ‘mechanical’ effect of energy rebates, the RBA is likely to be more focussed on measures of core inflation that may reduce more gradually.”