Reserve Bank of Australia keeps rates on hold and expresses concerns about persisting inflationary pressure

The Reserve Bank of Australia has maintained interest rates at 4.35%, a 12-year high, signaling a cautious stance on inflation despite recent economic challenges.
This decision follows expectations of a steady outcome, influenced by subdued economic growth and decelerated wage increases, even though inflation remains elevated.

The RBA’s June policy meeting highlighted the mixed nature of recent economic data. The economy recorded a meager 0.1% quarterly growth, while wage growth has slowed from its peak, indicating a gradually loosening labor market.
Despite these signs of economic cooling, inflation has risen to a five-month high of 3.6% in April, reinforcing the central bank’s vigilance against inflation risks.

Governor Michele Bullock and the RBA Board emphasized the importance of remaining alert to potential inflationary pressures.
The statement noted that the economic outlook is uncertain, and the path to achieving the inflation target would be challenging, with risks of consumption and saving rate adjustments adding to the upside risks.

Looking ahead, the RBA’s cautious approach is driven by the persistent nature of inflation, notwithstanding government measures like electricity rebates aimed at reducing the cost of living and potentially lowering headline inflation in the latter half of the year.
While the RBA’s stance remains vigilant, the majority of economists predict that interest rate cuts will likely occur only in the last quarter of the year, provided that inflationary pressures ease and economic conditions warrant such a move.