Australia’s Central Bank Holds Interest Rates Steady Amid Inflation Concerns

Australia’s Central Bank Maintains 4.35% Interest Rate Amid Persistent Inflation

RBA Holds Rates, Monitoring Inflation Risks

The Reserve Bank of Australia (RBA) kept its interest rate unchanged at 4.35% in its November policy meeting, signaling a cautious approach to managing inflation. The decision aligns with market expectations as core inflation remains persistently high despite broader economic slowing. While the headline inflation rate dropped to 2.8% in the third quarter, much of this decrease was attributed to government rebates on electricity bills. Underlying inflation, a key focus for the RBA, remains sticky at 3.5%, above the target range of 2-3%.

Minimal Market Reaction

Following the RBA's decision, the Australian dollar saw limited movement, hovering at $0.6590. Market projections for a rate cut are now pushed to mid-2024, as the RBA intends to maintain restrictive policies until clear signs of slowing core inflation emerge.

RBA Outlook: No Cuts in Sight

Despite modest economic growth in recent quarters, Australia’s labor market has shown resilience. Employment gains averaged 3.1% over the past year, double that of the U.S., with the jobless rate holding steady at 4.1%. This robust labor market strengthens the RBA's stance to keep rates elevated for now, leaving the possibility of rate cuts open but unlikely in the immediate term.