Reserve Bank of Australia Keeps Interest Rates Unchanged

Investing.com– The Reserve Bank of Australia (RBA) kept interest rates unchanged on Tuesday, signaling that it will continue to maintain restrictive monetary policy due to concerns over high inflation.

The RBA left its benchmark cash rate at 4.35%, after last increasing the rate a year ago. This decision was widely anticipated by markets.

The RBA stated that returning inflation to its 2% to 3% target remained its “highest priority” and that the bank was not “ruling anything in or out.”

> “Policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range,” the RBA said, adding that underlying inflation still remained “too high.”

The board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.

Recent data indicated that the Australian consumer price index inflation fell within the RBA’s annual target range in the third quarter. However, underlying inflation remained sticky and well above the RBA’s target range. The central bank reiterated that it only expected inflation to sustainably reach its target by 2026.

Australian economic growth has cooled substantially in recent quarters amid pressure from high interest rates, yet this did not lead to a meaningful decline in inflation. A strong job market, high housing costs, and sticky services inflation have contributed to elevated price pressures.

The RBA made no mention of any plans to ease monetary policy, contrasting with other major central banks, particularly the Federal Reserve, which began cutting interest rates earlier this year. The Fed is expected to lower rates further this week.

The Australian dollar strengthened slightly following the RBA's decision, as it suggests that interest rates are likely to remain high for an extended period. The AUD/USD pair rose 0.1%.

Australian stocks, however, maintained their losses, with the ASX 200 index trading down 0.4%.