FX.co ★ Australia Holds Interest Rate At 13-Year High

The Reserve Bank of Australia (RBA), under the leadership of Michele Bullock, has decided to maintain the interest rate at a 13-year high for the eighth consecutive session. The cash rate target remains at 4.35 percent, a level it reached in November 2023 after a 25 basis points increase, marking the highest rate since the end of 2011. The interest rate on Exchange Settlement balances also stays unchanged at 4.25 percent.

The RBA remains cautious about the potential for inflation to rise and has not ruled out future adjustments to its monetary policy. "Monetary policy needs to remain sufficiently stringent until the Board is assured that inflation is sustainably progressing towards the target range," the bank stated.

Despite a significant decline in headline inflation, the RBA noted that underlying inflation, which better reflects the underlying momentum, continues to be unacceptably high. The bank forecasts that it will take some time for inflation to align with the target range and move towards the midpoint.

In its Statement on Monetary Policy, the RBA predicts that year-ended headline inflation will increase above the target band in the September quarter of 2025 as financial rebates phase out. Additionally, underlying inflation isn't anticipated to achieve 3 percent until the June quarter of next year. Economic growth is expected to return to its potential growth rate by late 2025.