As expected, the Reserve Bank of Australia (RBA) unanimously voted to keep the official cash rate on hold at 4.35% at today’s monetary policy meeting.
The key quotes from its media statement are below, with the RBA noting that monetary policy is restrictive and that it wants to see how the economy and global energy markets evolve before moving rates up or down:
The Board remains focused on ensuring that inflation does not become embedded once the impulse from higher oil prices has passed through. To achieve this, growth in demand needs to slow to reduce capacity pressures and help bring inflation back to target.
Following the three increases in the cash rate target since the beginning of the year, financial conditions are now tighter than they were, and there are signs that the economy is slowing as expected. But inflation is still too high and the Board judged that it was appropriate to leave the cash rate target unchanged while it assesses the response to previous interest rate rises and the impact of the oil supply disruption.
The Board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions. In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand and the outlook for inflation and the labour market.
Monetary policy is well placed to respond to developments and the Board is focused on its mandate to deliver price stability and full employment. It will do what it considers necessary to achieve that outcome, including increasing the cash rate target further if required.
In other words, the RBA will move rates depending on how incoming data develops.
That said, the decision can be viewed as a hawkish hold given it is concerned about inflation becoming embedded and that it explicitly flagged “increasing the cash rate target further if required” should inflation worsen.
