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 2023 but have since left it unchanged. Over this period, officials have noted that previous policy tightening should help return inflation to within their target range of two percent to three percent over the forecast period.

In the statement accompanying today's decision, however, officials again expressed concern about the strength of price pressures. Officials noted that recent declines in headline inflation were partly driven by temporary measures, in particular government rebates for fuel and electricity, and that measures of underlying inflation remain too high.

In their Statement on Monetary Policy also published today, officials provided updated inflation forecasts. Officials now expect headline inflation to be lower in the near-term, forecasting it to fall to 2.6 percent at end-2023, compared with a previous forecast of 3.0 percent, and 2.5 percent by mid-2025, compared with the previous forecast of 2.8 percent. But forecasts further out are little changed, and officials continue to forecast headline inflation to return above above the target range as the impact of temporary measures drops out before falling back within the range at end-2026.

Officials' forecasts for the trimmed mean measure of underlying inflation are little changed. This measure is forecast to fall only gradually, returning to within the target range at end-2025. Reflecting this forecast, officials concluded at today's meeting that"it will be some time yet before inflation is sustainably in the target range and approaching the midpoint".

Officials also reiterated today that returning inflation to target remains their highest priority. They advised that they are"not ruling anything in or out", implying that further rate increases could be considered if deemed necessary. Official also stressed that policy must remain"sufficiently restrictive" until they are"confident that inflation is moving sustainably towards the target range".

Inflation has come down nicely but forecasters look for the RBA to keep rates on hold until early next year. No change seen this time from 4.35 percent for the official cash rate.

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.