Australians will experience a calendar year of unchanged interest rates after the Reserve Bank of Australia held the cash rate steady, as widely expected.<\/p>\n
The key interest rate has been unchanged at 4.35 per cent since November 2023, and will remain there until at least November 5 when the central bank\u2019s board next meets.<\/p>\n
Economists almost universally predicted the RBA would keep the rate on hold on Tuesday, despite its US counterpart the Federal Reserve kicking off its monetary easing cycle with a bumper 50 basis point cut.<\/p>\n
But the economic imperatives of the two institutions are very different.<\/p>\n
While inflation in the US has eased to within reach of the Fed\u2019s target, the RBA remains concerned more work needs to be done to bring price growth to heel.<\/p>\n
Underlying inflation is still worryingly high at 3.9 per cent, while the Australian labour market remains in rude health with unemployment at a relatively low 4.2 per cent and participation at a record high.<\/p>\n
In its monetary policy statement, the Reserve Bank board maintained its hawkish tone and said it would not rule anything in or out in its fight against inflation.<\/p>\n
\u201cWhile headline inflation will decline for a time, underlying inflation is more indicative of inflation momentum, and it remains too high,\u201d the statement said.<\/p>\n
\u201cPolicy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range.\u201d<\/p>\n
The board still predicts inflation to return to the target range of two to three per cent in late 2025.<\/p>\n
\u201cThe board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome,\u201d it said.<\/p>\n
Tim Lawless, Research Director at CoreLogic Asia Pacific, said the decision to keep rates steady implies the RBA is satisfied with the gradual downward trajectory of inflation.<\/p>\n
\u201cOverall, the hold decision could provide a boost to consumer sentiment, as more households firm up their opinion that rate hikes are over and the next move from the RBA will be a downwards one,\u201d he said.<\/p>\n
\u201cThe only uncertainty at the moment is the timing and speed of rate cuts.\u201d<\/p>\n
By\u00a0Jacob Shteyman<\/b>\u00a0in Sydney for AAP.<\/p>\n