Reserve Bank of Australia Maintains Cash Rate at 4.35%
- The Reserve Bank of Australia has maintained its cash rate at 4.35% as it monitors inflation trends.
- Underlying inflation remains at 3.5%, exceeding the bank's target range, while headline inflation has declined to 2.8%.
- The decision indicates the RBA's continued vigilance regarding economic conditions and suggests a potential rate cut may not come until mid-2025.
On November 5, 2024, the Reserve Bank of Australia (RBA) decided to keep its key interest rate at 4.35% for the eighth consecutive meeting. This decision comes as inflation remains an important concern, with underlying inflation currently at 3.5%, exceeding the bank's target range of 2%-3%. Although the overall annual headline inflation dropped to 2.8% in the September quarter, the RBA indicated that further evidence is needed before they can consider a rate reduction. The RBA's recent update included revised forecasts for economic growth, inflation, and wage growth. The Australian economy is expected to grow at a rate slightly lower than previously anticipated, with GDP growth projected to rise from 1% annually to 2.3% by mid-2025. However, the RBA also noted potential challenges related to net migration rates, which could negatively impact economic growth. In its statement, the RBA emphasized the importance of staying vigilant regarding inflation, suggesting that the current economic conditions and risks could lead to prolonged high rates. Investors have anticipated that the first rate cut might not occur until mid-2025, reflecting their outlook on inflation trends and the labor market. Global uncertainties, particularly related to economic performance in China, could influence demand for Australian exports, highlighting the interconnectedness of the global economy and local inflationary pressures.