SYDNEY - The Reserve Bank of Australia (RBA) on Tuesday kept cash rate unchanged at 4.35 percent, with interest rate paid on Exchange Settlement balances steady at 4.25 percent. The Consumer Price Index rose 0.6 percent in the December 2023 quarter and 4.1 percent annually, according to the Australian Bureau of Statistics.
Despite progress of bringing down inflation from a peak of 7.8 percent in the December 2022 quarter, the highest level since 1990, the central bank said that inflation remained high, especially in the prices of services. “Services price inflation, however, declined at a more gradual pace in line with the RBA’s earlier forecasts and remains high. This is consistent with continuing excess demand in the economy and strong domestic cost pressures, both for labor and non-labor inputs,” it said in a statement.
With economic outlook “still highly uncertain”, it reiterated its priority of returning inflation to the target. The central bank forecast inflation to return to the target range of 2-3 percent in 2025, and to the midpoint in 2026. “The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks, and a further increase in interest rates can not be ruled out,” it said.