The RBA increased the cash rate target and interest rate on Exchange Settlement balances by 25 basis points each, citing persistently high inflation. Despite an expected decline, inflation is projected to remain around 3½ per cent by the end of 2024, and potentially hit the top of the 2 to 3 per cent target range by the end of 2025. The decision reflects the need to ensure that inflation returns to the target range within a reasonable timeframe.
The decision follows a period of steady interest rates since June, during which the economy experienced stronger-than-anticipated growth, but with below-trend projections ahead. Tight labour market conditions, rising housing prices, and weaker household consumption growth were also considered. The RBA highlighted the importance of stabilising inflation due to its detrimental effects on the economy, households, and businesses.
Uncertainties persist, particularly regarding the impact of global economic conditions and the potential for services price inflation to remain persistently high. The RBA emphasized the need to closely monitor data and risks, indicating that future monetary policy adjustments will depend on evolving economic assessments. The RBA remains committed to its goal of returning inflation to the target range.