Rba Keeps Interest Rate

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Rba Keeps Interest Rate

Rba Keeps Interest Rate At 4.35%, Hints At More Rate Hikes

The RBA meeting has finally concluded and resulted in no change to the official cash rate. This was widely expected as the RBA is still worried about high inflation.

RBA also made it clear that more rate hikes can become a reality if the inflation pressure in Australia remains sticky.

Inflation Remains A Risk Factor

As a result, the cash rate in Australia is 4.35% with no change which was mostly in line with the forecasts. Additionally, a move like this was already priced in which is why most market players were not surprised at all.

Despite the inflation concerns, there are growing odds that the RBA has little reason to raise rates as inflation is in a downward trend.

To offset the rumors, the RBA added that inflation numbers are still too high. So, even though the inflation has gone down in Australia, it is still not enough to please the RBA.

Overall, the whole situation revolving around the RBA, inflation, and the interest rate has cast doubts on the economic outlook of Australia.

In the words of the RBA, the target of 2 - 3% inflation will be achieved in the year 2025. Considering the year 2024 has just started, it means the markets will have to wait for 1-2 years at the minimum.

RBA also added that the interest rates are acting as a deterrent to the rise in inflation. As for the rate cuts, they added that they arent thinking about it yet as inflation is still their #1 priority.

In the last 2 years, around 425 bps (4.25%) worth of rate hikes were delivered by the RBA. The sudden jump in interest rates was due to the higher inflation.

It all started with the COVID as the Australian government was pushed to increase its spending. Although this helped support the economy, the end result was higher inflation. After the announcement by the RBA, the AUD jumped by 0.3% while the stock index (ASX 200) extended its losses.

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