As expected, RBA The Reserve Bank of Australia (RBA) kept interest rates unchanged at 4.35%. In November.
The Reserve Bank of Australia acknowledged that headline inflation has fallen sharply due to lower fuel and energy prices, but warned it could rise again as the cost of living declines.
Core inflation, which the RBA believes is more of an indicator of inflation momentum, “remains very high”. The central bank expects that it will be “some time” (read: 2026) before core inflation remains within the middle of the RBA’s target of 2%-3%.
Growth remained weak In the June quarter, household consumption growth was weaker than expected. On the other hand, public demand helped boost economic activity and labor demand.
Speaking of action, the RBA thinks… Working conditions have eased but remain tight compared to full employment. Wage growth is moderating, but labor cost growth remains high and productivity growth is weak.
for now, RBA members remain focused on “Inflation returns to the target level within a reasonable period of time,“which involves survival”Beware of inflation risks“ And not to judge anything in or out regarding policy choices.
Link to the RBA’s November decision
In its latest quarterly economic forecasts, the Reserve Bank of Australia expects Economic inflation To remain above the 2%-3% target range until late 2025with expectations that the CPI will reach 2.5% by the end of 2026. This represents a slower path to achieving the target compared to the August forecast.
As the central bank expects Slightly slower growthGDP is expected to reach 1.5% in the year to December 2024 (down from 1.7% in August) before accelerating to 2.2% by the end of 2026. The Reserve Bank of Australia noted that 2025 forecasts have been revised “slightly higher”. After taking into account the recent Chinese stimulus package announcements.
GDP growth is still expected to average 1.2% in 2024 before improving to 2.2% (down from 2.5%) in 2025.
Labor market conditions are expected to ease furtherThe unemployment rate is now expected to rise to 4.3% by the end of 2024 and then gradually rise to 4.5% over 2025 and 2026 – an even more significant doubling compared to the August forecast.
Last but not least, the Reserve Bank of Australia’s assumptions come into play The cash interest rate will continue to declineTo reach 3.5% by 2026.
Link to the Reserve Bank of Australia’s November Monetary Policy Statement
In her press conference, RBA Governor Michelle Bullock highlighted the central bank’s focus on upside inflation risks, which is why she also believes… “Prices should remain capped for now.“
Bullock shared that No clear scenarios for changing interest rates were discussedAlthough she and her team are prepared to take action if the economy slows more than expected.
Link to RBA Governor Bullock’s press release
Australian dollar against major currencies: 5 minutes
Overlay of the Australian dollar against major currencies Chart by TradingView
The Australian dollar, which found early support from Asian traders who unloaded their bets on a “Trump trade,” traded in tight ranges ahead of the RBA event.
The Australian dollar initially saw slight declines in the RBA statement, but Bullock’s emphasis on vigilance against high inflation encouraged a hawkish outlook and led to intraday gains for the Australian dollar.
The Australian dollar is in the green across all sectors, trading stronger against the Japanese yen, Swiss franc and US dollar while seeing the slightest gains against the New Zealand dollar and British pound.
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