Key Points
- The RBA has announced the cash rate will remain unchanged at 4.35 per cent.
- Interest rates have been on hold since November 2023.
- Inflation has remained above the central bank's 2 to 3 per cent target since late 2021.
Interest rates will be held at 4.35 per cent, the Reserve Bank of Australia (RBA) has announced.
The cash rate has remained unchanged in 2024 — something widely anticipated by economists.
Interest rates have remained unchanged since November 2023. Source: SBS News
The RBA closely monitors inflation ahead of interest rate decisions, with rising inflation often leading to rate rises and lower interest leading to reductions.
"It is proving to be sticky and the progress in getting inflation down has slowed and Australia isn't any different here," she said.
Progress in getting inflation down has slowedMichele Bullock
Bullock said that, while household real incomes are expected to rise in July with tax cuts and lower inflation, many households around Australia are struggling with interest rates and the high cost of living.
"On average, households have reduced their saving rate by more than we thought to support their spending," she said.
"It's tough just to keep up with essentials: groceries, petrol, health, education, rents, insurance, expenses. I could go on. They're all going up."
In a statement, Treasurer Jim Chalmers said, while progress had been made against inflation, it remains "higher than we would like".
"While we’ve made welcome and encouraging progress in the fight against inflation, it’s not mission accomplished because people are still under the pump," he said.
"We know that the interest rate rises already in the system are having an impact because people are under pressure and our economy is soft.
"Our economy is slowing as a result of higher interest rates, which are already hammering consumption growth."
When will interest rates be reduced?
Interest rates are not expected to be reduced unless inflation eases.
"We need a lot to go our way if we're going to bring inflation back down to the 2 per cent target range," Bullock said.
"The board does need to be confident that inflation is moving sustainably towards target, and it will do what is necessary to achieve that outcome."
The RBA board had discussed the case for increasing interest rates at the meeting, but decided the current strategy was the "right way to go", she said.
When asked about the likelihood of a future rate rise, she said the board was "not ruling anything in or anything out".
"If it looks like inflation is not coming sustainably back in the band within a reasonable amount of time, that just increases the risks that inflation expectations will adjust and that will make it harder to get inflation down in the future," she said.
"So that's really the crux of it."
The RBA board will next meet in August.
