The Reserve Bank of Australia (RBA) has opted to maintain the current interest rate at 4.35%.
This rate will remain unchanged for the next six weeks until the RBA Board’s scheduled meeting in late September.
The decision comes amid heightened financial and stock market volatility, including a significant sell-off in major tech stocks that has led to a substantial loss in market value globally.
In a statement, the RBA Board noted the recent market turbulence and the depreciation of the Australian dollar. They highlighted ongoing geopolitical uncertainties that could impact supply chains.
“The board will continue to rely on data and the evolving risk assessment to inform its decisions. This includes monitoring global economic and financial market trends, domestic demand, inflation forecasts, and the labour market outlook,” the statement said.
Additionally, the RBA has released its latest quarterly Statement on Monetary Policy (SOMP), which updates its forecasts for inflation, employment, and economic activity.
The RBA now anticipates a slightly longer timeframe for underlying inflation, or “trimmed mean” inflation, to return to the 2.5% target compared to earlier forecasts from May. The outlook for the labour market has also been revised to reflect a weaker than expected performance.
According to the SOMP:
“Underlying inflation is projected to reach the target range of 2-3% by late 2025 and approach the midpoint in 2026. This slower return to target is attributed to increased inflationary pressures within the economy.
“Factors contributing to this include a stronger domestic demand outlook, driven by higher public spending and a rebound in household consumption as real disposable incomes and household wealth improve. However, the economy’s ability to meet this demand is assessed to be less robust than previously estimated,” the report stated.
