The Reserve Bank of Australia maintains interest rates at their highest level in 12 years

The Reserve Bank of Australia (RBA) has kept its cash rate steady at 4.35%, marking a 12-year high, as it continues to address persistent inflation pressures. This decision reflects the RBA’s cautious approach in balancing a strong labor market with inflation that remains above target. In recent comments, the RBA emphasized vigilance, signaling that it is keeping options open in light of potential inflation risks.

The bank’s latest projections show core inflation decreasing only modestly, with an expected decline to 3.4% by year-end from 3.5% in Q3. However, inflation is not anticipated to return to the target range until 2026. This hawkish approach sets the RBA apart from other major central banks, like those in the U.S., Eurozone, U.K., Canada, and New Zealand, which have either paused or begun easing rates due to moderating inflation.

The RBA has also adjusted its economic growth forecasts downward, pointing to weaker household consumption. The GDP growth forecast for 2023 has been lowered to 1.5% from 1.7%, while the 2024 forecast is trimmed to 2.3% from 2.5%. This adjustment underscores the RBA’s recognition of slower economic momentum, with recent quarters showing subdued growth.

RBA Governor Michele Bullock affirmed the central bank’s commitment to its current policy stance, suggesting that while settings remain appropriate for now, the RBA is prepared to respond to shifts in the economic outlook. However, with inflation as a primary concern, a rate cut seems unlikely in the near term, positioning the RBA as one of the few central banks still maintaining a hawkish stance amid global easing trends.