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 in November but have otherwise left it unchanged since mid-2023, reflecting an assessment that aggressive policy tightening over the previous twelve months will have the effect of returning inflation to within their target range of two percent to three percent.

In the statement accompanying today's decision, officials note that"inflation continues to moderate but remains high". The most recent monthly CPI data showed a fall in headline inflation from 4.3 percent in November to 3.4 percent in December, with quarterly measures also showing a fall in headline and underlying inflation. Officials still expect this downward trend to continue and inflation to return it its target range in 2025 but highlighted uncertainties impacting the inflation outlook in today's statement. Officials also noted that conditions in the labour market remain tight and that the outlook for household consumption remains uncertain.

Although officials left policy on hold today, they cautioned that"a further increase in interest rates cannot be ruled out" and reiterated that returning inflation to target remains their highest priority. The RBA's next meeting is scheduled for mid-March.

Speaking at the post meeting media conference, Governor Michele Bullock expressed caution about the inflation outlook and was non-committal about the likely next move in policy rates, noting that"we're not ruling in or out anything". She stressed, however, that rate cuts would only be considered if officials are confident that inflation is set to return to their target range and remain there.

Saying"inflation is continuing to moderate", the Reserve Bank of Australia kept its policy rate steady at 4.35 percent in December after raising this rate by 25 basis points at its November meeting. The RBA is expected to once again hold policy steady at its February meeting.

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.