RBA Holds Interest Rates Steady at 4.35% Amid Lower Inflation

On November 5, 2024, the Reserve Bank of Australia (RBA) decided to maintain its cash rate at 4.35%, marking the eighth consecutive meeting without a change in interest rates. This follows a period of declining inflation, which has now reached its lowest point in nearly four years.

The RBA's last adjustment to interest rates occurred in November 2023, when it increased rates by 0.25 percentage points. Economists had widely anticipated that the RBA would keep the cash rate steady, as it represents the highest level since November 2011.

In the September quarter, headline inflation decreased to 2.8%, the lowest in over three years. However, the RBA noted that underlying inflation remains a concern, standing at 3.5%. In a statement, the RBA explained, "While headline inflation has fallen significantly and is expected to remain lower for a period, the underlying inflation figures are more critical for understanding inflation trends, and they remain elevated."

The RBA indicated that current forecasts suggest inflation may not return sustainably to the target range for some time. As such, policymakers emphasized the need to be cautious about inflationary pressures, stating that they would keep all options open regarding future monetary policy.

The central bank acknowledged that the existing high interest rates seem to be performing as expected, while also highlighting several uncertainties, particularly relating to the international economic landscape. Notably, they refrained from commenting on the upcoming US presidential election's potential implications on the global economy.

Public authorities in China have responded to a weak economic outlook with more expansionary measures, although the effectiveness of these strategies remains unclear at this time. Geopolitical factors also continue to present challenges for economic stability.

In this global context, as central banks in other countries are currently reducing interest rates, the RBA's decision could draw attention. For instance, the US Federal Reserve is expected to lower rates by 0.25 percentage points in its upcoming meeting, following a recent cut that brought their rates down to between 4.75% and 5%.

interest, inflation, economy