Australia central bank holds rates at 4.1% for fourth month

TThe RBA has jacked up interest rates by a whopping 400 basis points since May last year, and the latest assessment is that it sees a credible path where inflation can return to the bank’s 2-3 per cent target band in late 2025 with the cash rate at 4.1%. PHOTO: BLOOMBERG

Published Tue, Oct 3, 2023 · 11:58 AM

AUSTRALIA’S central bank held interest rates steady on Tuesday (Oct 3) for a fourth month, but again warned that further tightening might be needed to bring inflation to heel in a reasonable timeframe.

Wrapping up its October policy meeting, the Reserve Bank of Australia (RBA) held rates at 4.10 per cent and said recent data was consistent with inflation returning to its 2–3 per cent target over time with output and employment still growing.

Markets and economists had wagered on a steady outcome after a batch of economic data - including inflation, retail sales and job vacancies - did not materially change the interest rate outlook.

Some economists, however, have pencilled in a rate hike in November depending on the result of the third-quarter inflation report.

The Australian dollar barely budged on the steady outcome and was last at US$0.6343, having slid 0.3 per cent earlier in the day. Three-year bond futures also held earlier losses, down 4 ticks at 95.87.

“This will provide further time to assess the impact of the increase in interest rates to date and the economic outlook,” Michele Bullock, who took over from Philip Lowe last month as the governor of RBA, said in a statement almost identical to previous meetings.

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“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks.”

Over the month, inflation ticked up as expected due to petrol prices, job vacancies tumbled from historically high levels and consumer spending stayed subdued, suggesting the rate hikes so far are working to cool demand in the economy.

A surge in global bond yields is also tightening financial conditions, lessening the pressure on central banks to hike further.

Australian home prices strong as RBA seen standing pat

Sydney prices, the national bellwether, advanced 1 per cent, down slightly from the previous month, property consultancy CoreLogic says in a report on Monday.

Australian housing prices stay strong as RBA seen standing pat

The RBA has repeatedly stressed that a key economic uncertainty is how rising borrowing costs impact Australian households, which are the third most indebted in the developed world.

RBA to hold rate as Pimco sees hikes already hitting households

The Aussie was hovering at US$0.6367, bouncing back from a fresh 11-month low of US$0.6332 hit overnight.

Australian dollar pinned near fresh 11-mth low, support shaky

Job vacancies fell by 8.9 per cent from the previous quarter to 390,400, the biggest decline and the lowest level in two years, figures from the Australian Bureau of Statistics showed.

Australia job vacancies tumble from record levels in latest quarter

Retail sales are an important factor in rate decisions given that consumption accounts for roughly 60 per cent of gross domestic product.

Australian retail sales cool, boosting case to extend rate pause

The RBA has jacked up interest rates by a whopping 400 basis points since May last year, and the latest assessment is that it sees a credible path where inflation can return to the bank’s 2-3 per cent target band in late 2025 with the cash rate at 4.1 per cent. REUTERS

Reserve Bank of Australia Interest rates Inflation Australia

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