The Reserve Bank of Australia today left its main policy rate, the cash rate, unchanged at 4.10 percent for the second consecutive meeting, contrary to the consensus forecast for an increase of 25 basis points. Inflation data published since the RBA's last meeting showed some moderation in price pressures, and today's decision to leave rates on hold was widely seen as a possibility.

The statement accompanying today's decision notes that recent data are consistent with officials' assessment that price pressures are moderating. Monthly CPI data released last week showed a fall in headline inflation from 5.5 percent in May to 5.4 percent in June, slightly closer to the RBA's target range of two percent to three percent. Quarterly data showed headline inflation fell from 7.0 percent in the three months to March to 6.0 percent in the three months to June.

Although officials still expect inflation will continue to fall, today's statement reveals that they now expect it will take longer to return to their target range. Previously this was expected to happen by mid-2025, but now officials expect it will happen in late 2025. This appears to reflect their concerns about upside risks to the inflation outlook, including recent wage increases, ongoing tightness in the labour market, and the potential for higher inflation expectations.

Officials also remain concerned about risks to the growth outlook associated with the substantial policy tightening they have already implemented over the last 15 months. They note that the economy is currently growing below its trend rate and is expected to do so"for a while". The RBA will publish updated forecasts later in the week.

Reflecting this assessment, officials concluded that it was appropriate to leave policy rates on hold to"provide further time to assess the impact of the increase in interest rates to date and the economic outlook". They reiterated, however, that"some further tightening of monetary policy may be required" to return inflation to its target range"in a reasonable timeframe" and reaffirmed that they"will do what is necessary to achieve that", depending on incoming data.

Saying"higher rates are working to establish a more sustainable balance between supply and demand" and that"inflation in Australia has passed its peak" the RBA left rates unchanged at their July meeting. Yet for its August meeting, despite slowing inflation data, the bank is expected to raise rates by 25 basis points though the call is not unanimous with many forecasters calling for no action.

The Reserve bank of Australia (RBA) announces its monetary policy with regard to interest rates on the first Tuesday of each month with the exception of January when it is on vacation. The RBA is the central bank of Australia and its duty is to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people. It does this by setting the cash rate to meet an agreed medium-term inflation target, working to maintain a strong financial system and efficient payments system.

The Reserve Bank of Australia's (RBA's) main responsibility is monetary policy. Policy decisions are made by the Reserve Bank Board with the objective of achieving low and stable inflation over the medium term. Other responsibilities include maintaining financial system stability, while at the same time promoting the safety and efficiency of the payments system. The RBA regards appropriate monetary policy as a major factor contributing to the Australian dollar's stability, which in turn leads to full employment and the economic prosperity for Australia.

The RBA is unique among the central banks - it has two boards with complementary responsibilities. The Reserve Bank Board is responsible for monetary policy and overall financial system stability. The Payments System Board has specific responsibility for the safety and efficiency of the payments system.

The RBA sets an interest rate at which it lends to financial institutions. This interest rate then affects the whole range of interest rates set by commercial banks and other institutions for their own savers and borrowers. It also tends to affect the price of financial assets, such as bonds and shares, and the exchange rate, which affect consumer and business demand in a variety of ways. Lowering or raising interest rates affects spending in the economy.

The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, few homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the financial markets, while lower interest rates are bullish.