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RBA keeps the cash rate at 4.35% amid sticky inflation risks

The RBA said inflation is still too high, and it will be prepared to raise the cash rate further if upside risks materialize.

Reported · Written up by our desk · Central Banks

The Reserve Bank of Australia decided to hold its Official Cash Rate unchanged at 4.35% following its August monetary policy meeting, extending a pause after three 25 basis point hikes earlier this year. The decision was unanimous, according to FXStreet.

In its assessment, the RBA said the impact of the Middle East conflict on inflation has so far been less than expected, but headline inflation remains elevated and risks are skewed to the upside. The central bank added that trimmed mean inflation is still high and that short term inflation expectations have eased but remain higher than earlier in the year.

The RBA said it wants to prevent high inflation from becoming embedded and judged current policy to be somewhat restrictive. It left the cash rate target unchanged while it assesses how the economy is evolving, noting labour market leading indicators point to only limited easing near term.

The RBA also said inflation is not expected to return to around the midpoint of the target range until late 2027, with upside risks to its projection and scenarios where inflation is higher and activity is lower. It cited tighter financial conditions after the recent rate increases and revised its outlook to see the economy returning to balance in 2027, with inflation pressures persisting above 3% until mid 2027.

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