MNI BRIEF: RBA Holds At 4.35%, Maintains Stance

The Reserve Bank of Australia board kept its cash rate on hold at 4.35% and maintained its hawkish tone following the August meeting, despite revisions to its peak headline CPI forecast and interest rate assumptions.

The RBA expects headline CPI to fall back to the top of the 2-3% target by the December quarter, down 80 basis points from May’s predictions, while it lowered its cash rate assumption – based on market pricing – by 10bp to 4.3% by Q4, according to the Statement on Monetary Policy.

The RBA, however, expects trimmed mean inflation to rise 10bp by December to 3.5% before reaching 2.9% by Q4 2025, 10bp higher than May’s forecast. The bank also updated its unemployment prediction 10bp higher to 4.3% by Q4.

“In underlying terms, as represented by the trimmed mean, the CPI rose by 3.9% over the year to the June quarter, broadly as forecast in the May Statement on Monetary Policy (SMP),” the board noted in a statement. “But the latest numbers also demonstrate that inflation is proving persistent. In year-ended terms, underlying inflation has now been above the midpoint of the target for 11 consecutive quarters. And quarterly underlying CPI inflation has fallen very little over the past year.”

The board’s decision was largely anticipated. (See MNI RBA WATCH: Board To Hold, Await Further Inflation Insight) Governor Michelle Bullock will address the media at 3:30pm AEST.