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No change to interest rates as inflation continues to moderate

The Reserve Bank of Australia board kept interest rates steady in March after the body switched to a new reporting cycle.

Mar 19, 2024, updated Mar 19, 2024
Reserve Bank Governor Michele Bullock. Photo: Darren England/AAP

Reserve Bank Governor Michele Bullock. Photo: Darren England/AAP

Interest rates will remain unchanged at 4.35 per cent in March, with the Reserve Bank of Australia maintaining a conservative touch on the economic lever, as expected by economists.

The RBA board’s statement – released for the first time in the middle of a month rather than on the month’s first Tuesday after new Governor Michelle Bullock introduced a fresh approach to making the interest rates decisions – said inflation continued to moderate “but remains high”.

“Recent information suggests that inflation continues to moderate, in line with the RBA’s latest forecasts,” the RBA board said.

“The headline monthly CPI indicator was steady at 3.4 per cent over the year to January, with momentum easing over recent months, driven by moderating goods inflation. Services inflation remains elevated, and is moderating at a more gradual pace.

“The data are consistent with continuing excess demand in the economy and strong domestic cost pressures, both for labour and non-labour inputs.”

The March decision is the third period in a row where the RBA has left interest rates steady, after keeping any movement on hold in December 2023 and February 2024. The RBA board does not meet in January.

The board’s decision turned on “higher interest rates… working to establish a more sustainable balance between aggregate demand and supply in the economy”.

“Accordingly, conditions in the labour market continue to ease gradually, although they remain righter than is consistent with sustained full employment and inflation at target,” the board said.

“Wages growth picked up a little further in the December quarter, but appears to have peaked with indications it will moderate over the year ahead.

“Nevertheless, this level of wages growth remains consistent with the inflation target only on the assumption that productivity growth increases to around its long-run average.”

The board added that “the outlook remains highly uncertain”, and “household consumption growth remains particularly weak amid high inflation and the rise in interest rates”.

It comes after Australian Bureau of Statistics data released in February showed the rate of inflation was steady at 3.4 per cent in the year to January 2024.

It was the second month in a row for the CPI to hit 3.4 per cent, which is well off recent highs of 8.4 per cent recorded at December 2022.

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