RBA holds rates for the third time in a row
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The Reserve Bank of Australia (RBA) has decided to leave the cash rate target unchanged at 4.35 percent. Inflation continues to moderate but remains high, with service inflation remaining elevated. Higher interest rates are working to establish a more sustainable balance between aggregate demand and supply in the economy. However, the outlook remains highly uncertain, with household consumption growth remaining weak amid high inflation and the rise in interest rates. The central forecasts are for inflation to return to the target range of 2–3 percent in 2025 and to the midpoint in 2026. Returning inflation to target within a reasonable timeframe remains the board’s highest priority.
Australian households
For Australian families and mortgage holders, this means that interest rates are likely to remain unchanged for the time being. While this may provide some relief for mortgage holders, the high inflation rate is still weighing on people’s real incomes, and household consumption growth is weak. The RBA is closely monitoring developments in the global economy, trends in domestic demand, and the outlook for inflation and the labour market, and it remains resolute in its determination to return inflation to target.
Returning inflation to target a priority
The Board’s main goal is to bring inflation back to the target within a reasonable period. This aligns with the RBA’s mandate for price stability and full employment. The board needs to be sure that inflation is moving steadily towards the target range. So far, medium-term inflation expectations have been in line with the inflation target, and it is crucial that this continues to be the case.
While recent data show that inflation is slowing down, it is still high. The Board anticipates that it will take some time before inflation is stable and within the target range. The interest rates that will best help inflation return to target in a reasonable period are unclear, and the Board is keeping all options open. The RBA Board will base its decisions on the data and the changing assessment of risks within the economy. The Board will keep a close watch on the global economy, domestic demand, and the inflation and labour market outlook. The RBA Board remains firm in its commitment to bring inflation back to target.RBA December 2022 decision
