The Reserve Bank of Australia has surprised most economists and left its cash target unchanged. Photo / NZME
The Reserve Bank of Australia has surprised most economists and left its cash target unchanged. Photo / NZME
The Reserve Bank of Australia has defied market expectations by leaving its cash rate target unchanged at 3.85%.
Market expectations were for the central bank to cut its rate by 25 basis points.
The bank said Australian inflation had fallen substantially since the peak in 2022, as higher interest rateshad been working to bring aggregate demand and supply closer towards balance.
“While recent monthly CPI [Consumer Price Index] Indicator data suggest that June quarter inflation is likely to be broadly in line with the forecast, they were, at the margin, slightly stronger than expected,” the bank said.
“With the cash rate 50 basis points lower than five months ago and wider economic conditions evolving broadly as expected, the [Monetary Policy] Board judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5% on a sustainable basis.”
Capital Economics said the statement sounded a touch more hawkish than expected.
For the first time, the RBA released an unattributed record of board votes, which showed six of the nine members supported today’s decision, with the three dissenters voting for another rate cut.
“The upshot is that barring a major upside surprise in the Q2 inflation data, we still expect a cut at the bank’s next meeting in August,” Capital Economics said.
The RBA’s decision precedes the Reserve Bank of New Zealand’s rate call at 2pm on Wednesday.
Expectations are that the bank will keep its Official Cash Rate on hold at 3.25%.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
