RBA Monetary Policy Decision – Summary
The Reserve Bank of Australia (RBA) Board has decided to keep the cash rate unchanged at 3.85%.
Key Reasons for Holding Rates:
- Inflation is Moderating:
- Inflation has eased significantly from its 2022 peak.
- Trimmed mean inflation sits at 2.9%, near the midpoint of the 2–3% target.
- Recent data was slightly stronger than expected, prompting caution.
- Previous Rate Cuts Still Flowing Through:
- The cash rate is already 50 basis points lower than five months ago.
- The Board wants more data to confirm inflation will sustainably reach 2.5% before cutting further.
- Uncertainty in the Outlook:
- Global risks remain high, especially around US trade policies.
- Domestically, demand is recovering, but unevenly.
- Some sectors face weak demand, limiting their ability to raise prices.
- Labour Market Still Tight:
- Low underutilisation and ongoing labour shortages persist.
- Wages growth has eased, but unit labour costs remain high due to weak productivity.
Risk Considerations:
- Domestic demand may recover more slowly than forecast, affecting jobs and growth.
- Alternatively, labour market strength could surprise to the upside.
- Timing and impact of past rate cuts remain uncertain.
- Business pricing and wage decisions will play a key role in inflation outcomes.
Board’s Stance:
- The Board is taking a cautious wait-and-see approach.
- Monetary policy remains ready to respond to global or domestic shocks.
- Focus remains on achieving price stability and full employment.
Notable Update:
- For the first time, the RBA has published the record of votes:
- 6 members voted to hold, while 3 voted in favour of a cut.
This decision reflects a careful balance between managing inflation and supporting economic recovery amid global uncertainty.