RBA rates decision: interest rate unchanged for third meeting in a row as Australian borrowers granted reprieve

The Reserve Bank of Australia board made the interest rate decision after its second two-day gathering of 2024. Photograph: Andrew Merry/Getty Images

Australian borrowers have been granted another reprieve with the Reserve Bank holding its key interest rate steady for a third meeting in a row as inflation continues to ebb towards its target range.

The RBA board left its cash rate unchanged at a 12-year high of 4.35% after its second two-day gathering of 2024 concluded on Tuesday afternoon. The result was widely expected by economists.

The central bank, though, has left itself the option of raising interest rates again if necessary.

“While recent data indicate that inflation is easing, it remains high,” the RBA said in a statement. “The Board expects that it will be some time yet before inflation is sustainably in the target range [of 2%-3%].”

“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,” it said.

Australia’s interest rates started rising later than many similar economies as the central bank sought to stem inflation that peaked in the December quarter of 2022 at 7.8%. The RBA targets price increases to rise between 2% and 3% a year.

The economy all but stalled at the end of 2023, with GDP expanding just 0.2% for the December quarter. Excluding population growth, economic activity per person contracted 1% from a year earlier, or the worst result outside the Covid pandemic period since the 1990s.

Before today’s decision, economists such as Timo Henckel, chair of the Australian National University’s Shadow RBA Board, said the central bank would likely hold rates steady until it was “really sure” inflation would fall to its target range by mid-2025.

Henckel noted inflation in the US had fallen “but that easing seems to have stalled a little bit”, a trend that would likely make the RBA cautious about acting too soon to cut interest rates here. “There’s a strong case and push to keep [rates] on hold.”

While some households were definitely enduring difficult conditions, “others were doing really well”, he said.

While the unemployment rate had lately climbed to 4.1%, the labour market was “still travelling by historical standards reasonably well”, Henckel said.

Market reaction saw the dollar ease slightly against the US dollar to 65.5 US cents, while stocks added to gains to be about 0.3% higher for the day.