News

RBA Not Ruling in or out Interest Rate Moves: March Minutes
Leaving the cash rate unchanged at 4.35% in Australia was the best way to achieve the central bank’s strategy of supporting a gradual return of inflation to the 2–3% target and the labour market to full employment, minutes of the Reserve Bank's March meeting showed. Members also viewed that returning inflation to the desired level remains the board’s highest priority. At the same time, it was important to preserve as many of the gains in the labour market as possible. The minutes revealed that recent economic data indicated the economy was tracking broadly as expected. While there were significant uncertainties, the risks seemed broadly balanced, it added. Members agreed that it was therefore not possible to either rule in or out future changes in the cash rate target. They agreed to reiterate their resolve to do what is necessary to return inflation to target.
Published on 2024-04-02

Australia Holds Cash Rate at 4.35%
The Reserve Bank of Australia maintained its cash rate at 4.35% during its March meeting, as widely expected. Tuesday's move came amid signs that economic growth has slowed following a total of 425bps rate hike over the past two years. Meanwhile, inflation continued to ease amid moderation in goods prices. The cost of services stayed elevated, with a more gradual pace of easing. The board said its highest priority was returning inflation to target within a reasonable timeframe, adding that it needed to be sure that prices are moving towards the 2–3% range in 2025 and the midpoint in 2026. The central viewed that the interest rate path remained uncertain as it did not rule anything in or out, and relied upon the data and the assessment of risks. The committee reiterated that it will closely monitor the global economy, trends in domestic demand, and the outlook for inflation and the labor market. The board also kept the interest rate on Exchange Settlement balances unchanged at 4.25%.
Published on 2024-03-19

Australia Holds Cash Rate, Signals More Hike
The Reserve Bank of Australia kept its cash rates unchanged at 4.35% during its first meeting in 2024, as widely expected. Tuesday's move came after the central bank delivered a total of 425bps rate hike over the past two years to curb a post-pandemic spike in inflation. The board said cost pressure in the country continued to ease but inflation remained high as prices of services were not falling quickly enough. While warning that further monetary tightening can not be ruled out, policymakers added that the path of interest rates will depend upon the data and the evolving assessment of risks. At the same time, the central bank needs to be confident that inflation will return to the target range of 2 to 3% in 2025, and the midpoint in 2026. The committee reiterated that it will closely monitor the global economy, trends in domestic demand, and the outlook for inflation and the labor market. The board also maintained the interest rate on Exchange Settlement balances at 4.25%.
Published on 2024-02-06

Australia Holds Cash Rate at 4.35%
The Reserve Bank of Australia maintained its cash rates at 4.35% during its final meeting of the year, as widely expected. Tuesday's move was in line with market expectations, allowing the central bank under the leadership of Governor Michele Bullock to assess the impact of previous rate hikes. Bullock last month cautioned that inflation was increasingly driven by excessive demand at home rather than supply shocks from abroad. The board said it was aware that progress in bringing inflation back to the goal of 2 to 3% was slower than earlier forecast, with underlying inflation higher than expected amid rising services costs. Policymakers reiterated that whether further tightening is needed will depend upon the data and the assessment of risks. The committee added that it will closely monitor the global economy, trends in domestic demand, and the outlook for inflation and the labor market. The central bank also kept unchanged the interest rate on Exchange Settlement balances at 4.25%.
Published on 2023-12-05

RBA Sees Upside Risks to Inflation
It was important to prevent inflation expectations in Australia from increasing significantly, given the costs of that eventuality, minutes of the Reserve Bank's meeting in November showed. Members were aware that inflation had continued to decline in the nation but underlying inflation was stronger than expected a few months earlier and, quarterly, had picked up slightly, it added. CPI inflation is now projected to be around 3-1/2% by the end of 2024 and at the top of the target range of 2 to 3% by the end of 2025. Members agreed that whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe would depend on how the incoming data alter the economic outlook and the evolving assessment of risks. All to say, the board is sticking with its commitment to return inflation to target. Meantime, Governor Michele Bullock said in a speech that inflation would remain a “crucial challenge” for the next “one or two years".
Published on 2023-11-21

RBA Warns of Inflation Risks Ahead
Inflation in Australia was still too high, as services prices remained elevated, Acting Assistant Governor of the Reserve Bank Marion Kohler said in a speech. She added that the next stage in bringing inflation back to target was likely to be more drawn out than the first. The comments came after the RBA last week lifted its cash rate to a 12-year high of 4.35% and signaled that further policy tightening may still be needed as inflation is likely to hit the top of the central bank's 2-3% target only by the end-2025. The official mentioned that the recent increase in fuel prices is also a timely reminder that upside surprises from supply shocks could affect headline inflation. "All to say, the road ahead could be bumpy," Kohler warned. Regarding the labor market, she noted that the board expects a further gradual easing, forecasting the jobless rate to increase around 4-1/4% in 2025 from the current 3.6%.
Published on 2023-11-13

RBA Sees Sticky Inflation, Lifts GDP Forecasts
The Reserve Bank of Australia expects inflation in the country will return to the top of its 2-3% goal by the end of 2025 as cost pressure is easing more slowly than previously thought due to persistent services inflation, the central bank said in its quarterly monetary policy statement. During the November meeting, the board raised cash rates by 25bps to a 12-year high of 4.35% after maintaining it in the prior 4 months following a total hike of 425bps since May 2022. The committee noted the economy had proved more resilient than expected, owing to strong government spending on infrastructure and robust migration. GDP growth now is expected to expand by 1.5% yoy in Q4 of 2023, stronger than August's projection of 1.1%. For the end of 2024, growth was lifted to 2.0% from earlier estimates of 1-3/4%, while the forecast for late 2025 stayed at 2.25%. Meantime, the jobless rate is seen peaking at 4.25% in 2024. The unemployment rate currently is near its lowest since the 1950s at 3.6%.
Published on 2023-11-10

Australia Lifts Cash Rate by 25Bps to 4.35%
The Reserve Bank of Australia raised its cash rate by 25bps to 4.35% in November after maintaining it at 4.1% in the prior four meetings, in line with market expectations. Tuesday's move brought borrowing costs to their highest level since January 2011, marking the 13th rate rise since May 2022, as inflation proved more persistent than expected a few months ago due to a further rise in prices of services. CPI inflation is now projected to be around 3-1/2% by the end of 2024 and at the top of the target range of 2 to 3% by the end of 2025. New governor Michelle Bullock said in a statement that whether further tightening is needed to bring inflation returns to the target in a reasonable timeframe will depend upon the data and the evolving assessment of risks. The board reiterated that it will closely monitor the global economy, trends in domestic demand, and the outlook for inflation and the labor market. The board also hiked the interest rate on Exchange Settlement balances at 4.25%.
Published on 2023-11-07

RBA Warns of Low Tolerance for Sticky Inflation: Minutes
The Reserve Bank of Australia considered hiking cash rates in October 2023 but decided to hold them steady for the fourth straight month, minutes of the latest meeting showed. During Michele Bullock’s first monetary policy meeting as governor, members noted the monthly CPI indicator suggested that progress in lowering services price inflation in the country remained slow. They also acknowledged that upside risks were a significant concern given how long inflation is likely to remain above target. At the same time, members were aware of a lag in policy transmission, as well as evidence that inflation had abated from its peak in December 2022 and consumption growth was weak. The central bank cautioned that it had a low tolerance for a slower return of inflation to target than currently expected, adding that some further tightening may be needed but it would depend on the incoming data, how these alter the economic outlook, and the evolving assessment of risks.
Published on 2023-10-17

Australia Holds Cash Rate at Bullock's First Meeting
The Reserve Bank of Australia kept its cash rate unchanged at 4.1% during the first meeting under new Governor Michele Bullock, extending the rate pause for the fourth straight month. Tuesday's move was in line with market estimates, with the board again saying inflation had passed its peak but it was still too high and will stay so for some time. Policymakers warned that some further monetary tightening may be needed to bring back inflation to the target range of 2 to 3% in late 2025. The committee reiterated any rate adjustment will depend upon how the economy and prices evolve. Meantime, the economy was a little stronger than expected over H1 of 2023 despite still experiencing a period of below-trend growth that will last for a while due to multiple headwinds at home and abroad, particularly from China. Simultaneously, unemployment is forecast to rise gradually to around 4.5% in late 2024. The committee also maintained the interest rate on Exchange Settlement balances at 4.0%.
Published on 2023-10-03

RBA Considered Rate Hike Before Deciding on Pause
The Reserve Bank of Australia mulled a 25bps hike in interest rates before eventually deciding to hold the cash rate unchanged at 4.1% for the third straight month, minutes of the central bank’s September meeting showed. The case to raise borrowing costs was based on the expectation that inflation would remain above the bank’s target for a prolonged period if productivity growth does not pick up as anticipated or if high services price inflation persists. Meantime, the case to maintain borrowing costs relied on the observation that interest rates had been increased significantly and its effects were yet to be fully realized. Members also noted that there was a risk the economy could slow more sharply than forecast. "Members agreed that the case to keep the cash rate target unchanged at this meeting was the stronger one," the minutes said. The board reiterated that some further tightening may be needed, adding that the move will be guided by the incoming data.
Published on 2023-09-19

Australia Holds Cash Rate for 3rd Straight Month
The Reserve Bank of Australia maintained its cash rate at 4.1% during the final meeting under Governor Philip Lowe, extending the rate pause for the third successive month, in line with market consensus. The board said that inflation had passed its peak but the readings remain too high and will stay so for some time. The central bank reiterated that some further monetary tightening may be needed to bring back inflation to the target range of 2 to 3% in a reasonable timeframe, adding that any rate adjustment will depend upon how the economy and prices evolve. The board projected that inflation will be around 3.25% by the end of 2024 and be back within the intended corridor in late 2025. Meantime, the Australian economy is experiencing a period of below-trend growth and this is expected to continue for a while, and unemployment is forecast to rise gradually to around 4.5% late next year. The committee also kept unchanged the interest rate on Exchange Settlement balances at 4.0%.
Published on 2023-09-05

RBA Signals Cautious Approach: MP Statement
The risks around the inflation outlook in Australia are broadly balanced, and if upside risks materialize, it could lead to prolonged high inflation and an increase in medium-term inflation expectations, the Reserve Bank of Australia (RBA) said in its quarterly Statement on Monetary Policy. The central bank acknowledged that cost pressure in Australia continued to fall in Q2 of 2023 but the inflation level at 6% was still too high. It reiterated that some further tightening may be needed but it will depend upon the data. Regarding economic forecasts, the central bank now sees economic growth slowing to 0.9% this year, down from the previous estimate of 1.2%, before picking up to 2.3% in 2025. Meantime, headline inflation is projected to ease to 4.1% by the end of the year, lower than earlier forecasts of 4.5%, but remains sticky in 2024, before returning to the target range of 2 to 3% in late 2025. The jobless rate is forecast to increase to 4.5% by mid-2025 from the current 3.5%.
Published on 2023-08-04

RBA Holds Cash Rate for Second Straight Month
The Reserve Bank of Australia kept its cash rate unchanged at 4.1% during its August meeting, extending the rate pause for the second successive month and defying market consensus of a 25bps rate hike. While highlighting that cost pressure in the country is easing, the central bank viewed that inflation at the level of 6% was still too high. The board reiterated that some further monetary tightening may be needed to ensure inflation returns to the target range of between 2 to 3% in a reasonable timeframe, adding that any rate adjustment will depend upon how the economy and prices evolve. The board projected that inflation will be around 3.25% by the end of 2024 and be back within the intended corridor in late 2025. Meantime, Australia's GDP growth is seen at around 1.75% over 2024 and unemployment is forecast to rise gradually to around 4.5% late next year. The central bank also kept unchanged the interest rate on Exchange Settlement balances at 4.0%.
Published on 2023-08-01

Further Tightening May be Needed: RBA Minutes
The Reserve Bank of Australia considered raising the cash rate by 25bps to 4.35% before deciding to keep it unchanged at 4.1%, and realized that both sets of arguments were strong, minutes of the July 4 policy meeting showed. The board viewed that inflation in Australia had eased from its peak but remained too high. Market measures of short-term inflation expectations had declined from their peaks but also remained high. The committee agreed to reassess the situation in August as it waits for more data on inflation, the global economy, the labor market and household spending, as well as an updated set of staff forecasts and a revised assessment of the risks. Members reaffirmed their determination to return inflation to target within a reasonable timeframe and their willingness to do what is necessary to achieve that outcome. Regarding the GDP, the board noted that growth in Australia had slowed considerably. GDP increased by 0.2% in Q1 of 2023 and was expected to be similar in Q2.
Published on 2023-07-18

RBA to Meet 8 Times A Year Under Sweeping Changes
The Reserve Bank of Australia will slash the number of times it meets in a year to set interest rates while making the meetings longer as part of a sweeping overhaul into how the central bank decides the country's monetary policy, governor Philip Lowe said in a speech Wednesday. From 2024, the board will meet eight times a year, rather than eleven. Those meetings will now run over two days, notably longer than the current ones. "The less frequent and longer meetings will provide more time for the board to examine issues in detail and to have deeper discussions on monetary policy strategy, alternative policy options and risks, as well as on communication," Lowe said. The post-meeting statements will now be issued by the board, not from the governor as is currently the case. The governor will hold a press conference after each board meeting to explain the decision; and the quarterly statement will be released on February, May, August and November.
Published on 2023-07-12

Australia Holds Cash Rate at 4.1%
The Reserve Bank of Australia maintained its cash rate at 4.1% during its July meeting after raising it by 25bps in June, with a total of 400bps since May 2022. The board said it needed more time to assess the impact of past hikes, adding that inflation in the country has passed its peak with the monthly CPI indicator showing a further drop of 5.6% in May. That said, inflation in Australia was still too high, at 7.0% in Q1 of 2023, and would remain so for some time yet. The central bank indicated that some further monetary tightening may be required to ensure inflation returns to the target range of between 2 to 3% in a reasonable timeframe, but it will depend upon how the economy and prices evolve. The committee mentioned that it will continue to closely monitor developments in the global economy, household spending trends, and inflation forecasts. The central bank also kept unchanged the interest rate on Exchange Settlement balances at 4.0%.
Published on 2023-07-04

RBA Frets Over Upside Risks to Inflation
The decision by the Reserve Bank of Australia to raise cash rates by 25bps to 4.1% in June 2023 was finely balanced, with further rate increases depending on how dynamics at home and abroad affect the inflation outlook, minutes of the central bank June policy meeting showed. The latest move by the board took the total amount of increases in borrowing costs to 400bps since May 2022. The committee highlighted that it will do what is needed to bring inflation back to the 2% to 3% target band over a reasonable timeframe. Meanwhile, recent data suggested that inflation risks in Australia had shifted somewhat to the upside. At the same time, members were aware that an extended period of high inflation would distort the economy and exacerbate cost-of-living pressures while hurting those on low incomes the most. Sustained high inflation would also lead to even higher interest rates in the future and a worse outlook for the labor market.
Published on 2023-06-20

Australia Unexpectedly Lifts Rates by 25Bps to 4.1%
The Reserve Bank of Australia unexpectedly raised the cash rate by 25bps to 4.1% in June after delivering a rate hike by the same margin in May while keeping the door open for further tightening as inflation remained persistently high while wage growth picked up. Tuesday's decision brought a total of 400bps rate increases since May 2022, pushing borrowing costs to their highest level since April 2012 and defying market consensus for a pause. Policymakers viewed that the upside risks to the inflation outlook in Australia have increased, mainly due to service price inflation. The board added that it was still seeking to keep the economy on an even keel as inflation returns to the 2–3% target, but the path to achieving a soft landing remains a narrow one. The committee said it remains resolute in its determination to return inflation to target and will do what is necessary to achieve that. The central bank also increased the interest rate on Exchange Settlement balances by 25bps to 4.0%.
Published on 2023-06-06

Further Rate Hikes May be Needed: RBA Minutes
The Reserve Bank of Australia's surprise decision to raise borrowing costs earlier this month was "finely balanced" as the central bank aimed at diminishing the risks of high inflation becoming entrenched in the economy, the board's May meeting minutes showed. During the meeting, members weighed up two options: holding steady the cash rate for the second straight month or increasing it for the 11th time in 12 gatherings. The central bank revealed that it does not expect inflation, which is currently at 7%, to return to the top of its 2 to 3% target range until June 2025, with concerns growing over an acceleration in services inflation and weak productivity growth. “Members agreed that further increases in interest rates may still be required, but that this would depend on how the economy and inflation evolve,” the minutes said.
Published on 2023-05-16