Reserve Bank of Australia Holds Cash Rate at 4.35% Amid Persistent Inflation Concerns

The Reserve Bank of Australia held its cash rate unchanged at 4.35% at its February 2024 meeting.

The RBA said in its post-meeting statement that a further increase in interest rates could not be ruled out.

INFLATION STILL ABOVE TARGET BAND

Inflation in Australia has been declining from its earlier peak, but the rate remains above the RBA's 2% to 3% target band. The board indicated it would continue to monitor incoming data closely and that it had not ruled out additional policy tightening if price pressures proved more stubborn than expected. The persistence of services inflation in particular has been a concern for the bank.

Household budgets remain under pressure from the cumulative impact of prior rate increases and high inflation, and the board noted that household consumption growth and dwelling investment were weak. The board also flagged a high level of uncertainty around the outlook for the Chinese economy and the implications of the conflicts in Ukraine and the Middle East.

TIGHTENING BIAS KEPT IN PLACE

Governor Michele Bullock and the board have consistently signalled that the priority is returning inflation to target within a reasonable time frame and that the bank is prepared to act further if required.