Australian Central Bank Keeps Interest Rates Steady in Line with Market Expectations

Forex - The Reserve Bank of Australia (RBA) has indicated that its primary focus is to sustainably bring inflation back to target, aligning with market expectations by not making any changes to the policy interest rate. According to the RBA's announcement, the benchmark interest rate has been maintained at 4.35%.

The statement highlighted that returning inflation sustainably to target within a reasonable timeframe remains the highest priority. It noted, "This is consistent with the RBA's mandate for price stability and full employment. Thus far, long-term inflation expectations have been consistent with the inflation target, and it is crucial for this to remain the case."

The RBA's Monetary Policy Board stated that it will continue to rely on data and evolving assessments of risks to guide its decisions, saying, "In doing so, it will closely monitor developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labor market. The Board will remain steadfast in its commitment to returning inflation to target and will do what is necessary to achieve this outcome."

In Australia, headline inflation has decreased from 3.8% in the second quarter to 2.8% in the third quarter, yet it remains slightly below the midpoint of the 2-3% target band. The forecasts released by the RBA today do not predict that inflation will sustainably return to the midpoint of the target by 2026. The statement indicated that the policy needs to remain sufficiently restrictive until the Board is assured that inflation is moving sustainably towards the target range.