Australia Central Bank Holds Policy Rate At 4.35%

The Reserve Bank of Australia decided to keep its benchmark interest rate unchanged at its March meeting on Tuesday, while the policy board said the economic outlook and the interest rate path are uncertain as inflation remains high, although it is moderating.

The policy board of the RBA, led by Governor Michele Bullock, decided to maintain the cash rate target at 4.35 percent for the third straight meeting.

The RBA board also retained the interest rate paid on exchange settlement balances at 4.25 percent.

“The Board expects that it will be some time yet before inflation is sustainably in the target range,” the RBA said in a statement.

“The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out.”

The central bank had increased its cash rate target by 425 basis points since May 2022. The current 4.35 percent is the highest since late 2011.

Recent official data showed that the country’s consumer price inflation was steady at 3.4 percent in January, suggesting that price growth continues to moderate, in line with the RBA’s latest forecasts.

The central forecasts are for inflation to return to the target range of 2-3 percent in 2025 and to the midpoint in 2026.

While there are encouraging signs that inflation is moderating, the economic outlook remains uncertain, the bank said in a statement.

“Given that recent data flow and the shift in the RBA’s language, we continue to expect that the RBA is on hold until its late-September meeting,” Westpac Chief Economist Luci Ellis said.

“At that point, it will have the full suite of data for the first half of 2024, including productivity and labour cost growth.”