The Reserve Bank of Australia (RBA) has announced that it will keep interest rates unchanged at its first board meeting under the leadership of new governor, Michele Bullock. Despite a recent uptick in inflation, which reached 5.2% in the 12 months leading up to August, the RBA has decided to maintain the cash rate at 4.10%, representing its fourth consecutive meeting without a change in rates.
Inflation in Australia has been a major concern for the RBA, but recent data suggests that it is gradually returning to the central bank’s target range of 2%-3%. The RBA acknowledges that further tightening of monetary policy may be necessary to ensure inflation returns to the target within a reasonable timeframe. However, any decisions regarding policy adjustments will depend on future data and assessments of potential risks.
Global central banks are currently grappling with renewed inflationary pressures stemming from rising energy and commodity prices. Additionally, rents remain persistently high in many countries. In Australia, for example, the increase in prices of gasoline played a significant role in driving up inflation in August.
Since May 2022, the RBA has implemented a total of 400 basis points worth of interest rate hikes. There is ongoing debate among economists regarding whether additional rate increases will be necessary to bring inflation back within the RBA’s target band. A recent review of the central bank emphasized the importance of achieving inflation within the middle of the target range.
The RBA’s decision to keep interest rates steady under Governor Michele Bullock reflects its cautious approach towards balancing inflationary pressures with the need for economic growth.