By Poppy Johnston, AAP
Mortgage holders have been granted another month of interest rate relief after the Reserve Bank of Australia left monetary policy unchanged, as expected.
The Reserve Bank of Australia has kept interest rates on ice in a widely expected move, with fresh forecasts highlighting a slightly faster path down for inflation and weaker economic growth.
Board members decided to leave interest rates steady at 4.35 per cent on Tuesday after the bank’s first two-day meeting.
Economists broadly expected no change in the official cash rate following a promising run of data, including a weaker-than-expected inflation print, muted spending numbers and signs of a softening jobs market.
With the 4.25 percentage points of monetary policy tightening since May 2022 clearly at work to cool the economy and bring down inflation, talk has turned to the timing of rate cuts.
Yet the board, led by governor Michele Bullock, said there was still a chance more interest rate hikes could be needed, although its view of the economy was broadly more optimistic than back in December.
“While recent data indicate that inflation is easing, it remains high,” it said in a statement.
“The board expects that it will be some time yet before inflation is sustainably in the target range.”
“The path of interest rates that will best ensure that inflation returns to target in a reasonable time frame will depend upon the data and the evolving assessment of risks, and a further increase in interest rates cannot be ruled out.”
“Encouraging signs” were highlighted but the board “remains highly attentive to inflation risks”.
Uncertainty hanging over the Chinese economy was flagged, as well as risks stemming from the conflicts in Ukraine and the Middle East.
Services price inflation could also prove persistent in Australia, as it has elsewhere, with the board noting it had declined at a more gradual pace than goods and in line with the RBA’s earlier forecasts.
Further insights into the February decision will be fleshed out in a press conference with Ms Bullock on Tuesday afternoon – a new edition to the post-meeting regime designed to inject more transparency into the bank’s operations.
The central bank has also revised its inflation forecasts down but still expects inflation will be back within its target range by the end of 2025 and around the midpoint in 2026.
The RBA sees inflation falling to 3.3 per cent by June this year before easing very gradually to 2.8 per cent – within the two to three per cent target range – by December next year.
Treasurer Jim Chalmers welcomed the rate relief for Australians “already under the pump”.
“As the Reserve Bank said in its statement, there are encouraging signs in our economy, inflation is moderating but they recognise, as we do, that inflation is still too high in our economy,” he told parliament on Tuesday.