- The Reserve Bank has left interest rates on hold
- Governor Michele Bullock said inflation too high
The Reserve Bank has delivered another blow to millions of Aussies with a mortgage by declining to cut interest rates.
The cash rate was left on hold at a 12-year high of 4.35 per cent even though the US, UK, Canada, European Union and New Zealand have this year already cut interest rates.
Reserve Bank Governor Michele Bullock delivered a blunt message on Tuesday to borrowers hoping for some relief soon from the most aggressive hikes in a generation.
‘While headline inflation will decline for a time, underlying inflation is more indicative of inflation momentum, and it remains too high,’ she said.
Underlying inflation, stripping out volatile price movements, was 3.9 per cent in the year to June, putting it way above the RBA’s 2 to 3 per cent target.
Headline inflation was slightly lower at 3.8 per cent but only because of the federal government’s $300 energy rebates that came into effect on July 1.
The RBA board emphasised its preferred underlying inflation measure, known as the trimmed mean, would be unlikely to fall under 3 per cent until the end of 2025, referencing last month’s statement on monetary policy.
‘The most recent projections in the August SMP show that it will be some time yet before inflation is sustainably in the target range,’ it said.
Ms Bullock also hinted another rate rise was still possible, even though the U.S. Federal Reserve last week delivered a super-sized 50 basis point rate cut.
‘Data since then have reinforced the need to remain vigilant to upside risks to inflation and the board is not ruling anything in or out,’ her board said.
‘Policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range.’
The Reserve Bank’s 13 interest rate rises in 2022 and 2023 were the most aggressive since the late 1980s.
Australia’s key inflation measures are higher than other first-world nations that have cut rates but the RBA cash rate didn’t go as high as the US, UK, EU, Canada or New Zealand.
The futures market had regarded a rate cut as only a 10 per cent chance heading into Tuesday’s decision.
