The Reserve Bank of Australia left its main policy rate, the cash rate, unchanged at 4.35 percent at its meeting today, in line with the consensus forecast. Officials increased this rate by 25 basis points at their meeting last month after leaving it unchanged in each of their previous four meetings. These decisions follow aggressive policy tightening over the previous twelve months as part of officials' efforts to return inflation back to within their target range of two percent to three percent.

In the statement accompanying today's decision, officials note that the limited information they have received since tightening policy further last month indicates that"inflation is continuing to moderate". The most recent monthly CPI data showed a fall in headline inflation from 5.6 percent in September to 4.9 percent in October, with measures of underlying inflation also falling. Officials still expect this downward trend to continue over 2024 but again highlighted upside risks to the inflation outlook in today's statement.

Officials also acknowledged risks to the growth outlook, with the outlook for consumer spending considered to be particularly uncertain given severe cost of living pressures and the impact of higher mortgage rates. They also noted, however, that conditions in the labour market remain strong.

After deciding last month that risks to the inflation outlook justified another rate hike, officials today concluded that"holding the cash rate steady at this meeting will allow time to assess the impact of the increases in interest rates on demand, inflation and the labour market". However, it is clear that returning inflation to its target range remains officials' top priority. Their statement concluded by reiterating that they"will do what is necessary" to achieve their objective, and they advised that further tightening may be required, depending on incoming data and their evolving assessment of risks. The RBA's next meeting is scheduled for early February.

Saying inflation was"proving more persistent than expected", the RBA raised rates in November by 25 basis points after holding policy steady at their prior four meetings. Expectations for December's meeting is no change.

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.