At its meeting today, the Reserve Bank decided to maintain the cash rate target at 4.35 per cent and the interest rate paid on Exchange Settlement balances at 4.25 per cent.
Inflation remains high but is moderating. Inflation eased in the December quarter, though it remains high at 4.1 per cent. Goods price inflation has decreased due to resolved global supply chain disruptions and lower domestic demand. However, services price inflation remains high, indicating continued excess demand and strong domestic cost pressures.
Higher interest rates are working to balance demand and supply in the economy. Labor market conditions are gradually easing, but still tighter than ideal. Wage growth has increased, but household consumption growth and dwelling investment remain weak.
The economic outlook is uncertain. While there are positive indicators, the Board is attentive to inflation risks. Inflation is projected to return to the target range of 2–3 per cent by 2025, with uncertainty due to factors such as persistent services price inflation and global economic conditions.
Returning inflation to target is the priority. The Board is committed to ensuring inflation moves sustainably towards the target range, with interest rate adjustments being considered to achieve this goal. Close attention will be paid to global economic trends, domestic demand, and the labor market to achieve this outcome.