The Reserve Bank of Australia has kept interest rates on hold at 4.1 per cent for the fourth consecutive month, with new RBA Governor Michele Bullock noting the 12 earlier increases are working.
In her first monetary policy statement as head of the RBA board Ms Bullock said inflation had passed its peak but was still too high.
“The higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so,” she said.
“In light of this and the uncertainty surrounding the economic outlook, the board again decided to hold interest rates steady this month.
“This will provide further time to assess the impact of the increase in interest rates to date and the economic outlook.”
The interest rate hold comes despite the monthly CPI indicator rising to 5.2 per cent in the 12 months to August, up on the 4.9 per cent recorded in July.
“Inflation in Australia has passed its peak but is still too high and will remain so for some time yet,” Ms Bullock said.
“Timely indicators on inflation suggest that goods price inflation has eased further, but the prices of many services are continuing to rise briskly and fuel prices have risen noticeably of late.
“Rent inflation also remains elevated. The central forecast is for CPI inflation to continue to decline and to be back within the 2–3 per cent target range in late 2025.”
Ms Bullock said there were also “significant uncertainties” around the outlook, with services price inflation remaining persistent overseas.
Something that could also happen in Australia.
“There are also uncertainties regarding the lags in the effect of monetary policy and how firms’ pricing decisions and wages respond to the slower growth in the economy at a time when the labour market remains tight,” Ms Bullock said.
“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.
“And globally, there remains a high level of uncertainty around the outlook for the Chinese economy due to ongoing stresses in the property market.”
The board also cautioned that more rate rises may be needed if inflation did not fall as predicted.
“In making its decisions, the board will continue to pay close attention to developments in the global economy, trends in household spending, and the outlook for inflation and the labour market,” Ms Bullock said.