The Reserve Bank of Australia (RBA) has decided to maintain its benchmark policy rate at 4.1%, aligning with economists' expectations. This decision comes amid indications that inflation is declining faster than previously anticipated.
Key Highlights:
- Steady Rate: RBA holds the policy rate at 4.1%.
- Inflation: February's inflation reading was 2.4%, lower than expected.
- Economic Growth: Australia's GDP grew 1.3% year-on-year in Q4 2024.
- Election: A national election is scheduled for May 3.
Economic Context
The country's inflation reading in February came in at a softer-than-expected 2.4%. Despite this, the central bank remains cautious, emphasizing the need for inflation to sustainably return to the target range of 2%-3%.
Australia’s GDP grew at 1.3% year on year in the fourth quarter of 2024, beating expectations and marking its fastest growth in a year.
RBA's Stance
RBA Governor Michelle Bullock stated, “we cannot declare victory on inflation just yet. It is not good enough for inflation to be back in the target range temporarily. The Board needs to be confident that is returning to the target range sustainably.”
She also addressed market expectations of further rate cuts, cautioning that such confidence might be premature.
Political Landscape
The decision occurs as Australia's government operates in caretaker mode, with Prime Minister Anthony Albanese announcing a national election set for May 3.