RBA keeps rates steady in final meeting of 2023; inflation risks remain
Investing.com-- The Reserve Bank of Australia kept interest rates on hold as expected on Tuesday, citing the need for more macroeconomic data to spur another rate decision, but warned that risks from high inflation still remained in play.
In its final meeting for 2023, the RBA kept its official cash target rate at 4.35%, as widely expected. The bank had hiked rates by 25 basis points in October, citing a recent uptick in inflation. While price pressures have cooled somewhat since then, consumer price index inflation still remains well above the RBA’s 2%-3% annual target range, and is only expected to fall within the range by mid-to-late 2025.
RBA Governor Michele Bullock said in a note that there were still “significant uncertainties” around the outlook on inflation, particularly that high global services price inflation could spill over into Australia.
She also noted that while the economy had cooled under high interest rates, it still remained largely resilient, which presented more upside risks to inflation.
Bullock reiterated the RBA’s data-driven approach to future monetary policy decisions. The Australian dollar slid 0.7% after the rate decision, given that the RBA offered no tangible cues on future rate decisions.
“Higher interest rates are working to establish a more sustainable balance between aggregate supply and demand in the economy. The impact of the more recent rate rises, including last month's, will continue to flow through the economy,” Bullock said.
The RBA governor had repeatedly warned of potential stickiness in inflation, especially due to resilient demand for goods and services. While retail spending also cooled somewhat this year, it remained near record levels in October.
Analysts at Westpac
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