(Bloomberg) — Australia’s central bank held its key interest rate at a 13-year high on Tuesday, aiming to keep up the pressure on stubbornly sticky inflation while joining much of the world in waiting for the outcome of US elections.
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As expected, the Reserve Bank left its cash rate at 4.35%, marking a year at that level, and restated that it isn’t “ruling anything in or out” on policy. The RBA’s board highlighted the “high level of uncertainty” about the international outlook.
Underlying inflation “remains too high,” the rate-setting board said in a statement. “It will be some time yet before inflation is sustainably in the target range and approaching the midpoint. This reinforces the need to remain vigilant to upside risks to inflation and the board is not ruling anything in or out.”
The Australian dollar and three-year sovereign bond yields held intraday gains after the release as traders see policy makers standing pat for the time being.
The governor will hold a press conference at 3:30 p.m. Sydney time.
Governor Michele Bullock has repeatedly said the RBA’s board isn’t ready to cut rates yet, insisting inflation needs to be “sustainably” inside the 2-3% target before doing so. As a result, traders have pushed back their pricing for an easing to May 2025, from February previously.
“The RBA remains on the hawkish side in the global central bank spectrum as it continues to stay away from the clear signalling of rate cuts,” said Charu Chanana, chief investment strategist at Saxo Asia Pacific. “That clearly fails to make an impact on markets, especially coming on a day when markets are awaiting the US election results in a closely-tied race, as well as announcements of further stimulus measures from China.”
While Australia’s core CPI has eased from its 2022 peak, at 3.5% it remains elevated and services inflation is still running strong. The RBA’s latest forecasts showed core inflation will hit its 2-3% target band in mid-to-late 2025, slightly earlier than it estimated in August.
The RBA said its policy is still “less restrictive” than peers even after rate cuts overseas, highlighting its outlier status. The Federal Reserve — which also meets this week — the Reserve Bank of New Zealand and other major central banks have already embarked on rate reductions to either preserve the strength of their economies or revive growth.
