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RBA leaves rates on hold

Mike Taylor5 December 2023
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The Reserve Bank has left interest rates on hold at 4.35%.

In what represents the last RBA board decision for 2023, the board again noted that inflation in Australia had passed its peak but, at the same time, signalled that further monetary tightening might be necessary moving into 2024.

The Reserve Bank Governor, Michelle Bullock said the decision reflected the Board’s view that progress was being made in bringing inflation back under control.

It said the limited information available since the November rate rise justified leaving rates on hold.

“The limited information received on the domestic economy since the November meeting has been broadly in line with expectations. The monthly CPI indicator for October suggested that inflation is continuing to moderate, driven by the goods sector; the inflation update did not, however, provide much more information on services inflation. Overall, measures of inflation expectations remain consistent with the inflation target.”

Referencing the outlook, Bullocks statement said:

“There are still significant uncertainties around the outlook. While there have been encouraging signs on goods inflation abroad, services price inflation has remained persistent and the same could occur in Australia. There also remains a high level of uncertainty around the outlook for the Chinese economy and the implications of the conflicts abroad. Domestically, there are uncertainties regarding the lags in the effect of monetary policy and how firms’ pricing decisions and wages will respond to the slower growth in the economy at a time when the labour market remains tight. The outlook for household consumption also remains uncertain, with many households experiencing a painful squeeze on their finances, while some are benefiting from rising housing prices, substantial savings buffers and higher interest income.”

“Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks. In making its decisions, the Board will continue to pay close attention to developments in the global economy, trends in domestic demand, and the outlook for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.”

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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