Interest rates paused as Reserve Bank mulls economy

RBA DECISION-MAKING BEHIND THE LATEST RATE PAUSE

The Reserve Bank of Australia board has decided to keep the cash rate steady at 4.1 per cent for July.

* Hiking interest rates by four percentage points since May 2022 is working to ‚Äúestablish a more sustainable balance between supply and demand in the economy and will continue to do so‚ÄĚ, RBA governor Philip Lowe says.

* Inflation has passed its peak, but it is still too high and will remain so for some time yet.

* High inflation erodes the value of savings, hurts household budgets, makes it harder for businesses to plan and invest, and worsens income inequality. That is why the RBA is seeking to return inflation to its two-to-three per cent target band.

* Growth in the Australian economy has slowed and conditions in the labour market have eased.

* Firms report labour shortages have lessened, but job vacancies and advertisements are still at very high levels.

* Wages growth has picked up but is still consistent with the inflation target, provided that productivity growth picks up.

* The path to the inflation target band is ‚Äúnarrow‚ÄĚ with the outlook for household consumption being a key source of uncertainty.

* Looking ahead, Dr Lowe says ‚Äúsome further tightening of monetary policy may be required‚ÄĚ to get inflation under control.

* ‚ÄúThe decision to hold interest rates steady this month provides the board with more time to assess the state of the economy and the economic outlook and associated risks,‚ÄĚ he says.

 

Paul Osborne
(Australian Associated Press)

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