RBA Monetary Policy Updates

RBA Monetary Policy Update – Feb 2024

The Reserve Bank of Australia (RBA) announced on 6 February 2024 that it will keep the cash rate target and the interest rate on Exchange Settlement balances unchanged at 4.35 per cent and 4.25 per cent respectively. This decision was based on the assessment of the inflation outlook and the economic conditions in Australia and abroad.

The RBA noted that inflation has moderated but remains high at 4.1 per cent, reflecting the excess demand in the economy and the strong cost pressures for both labour and non-labour inputs. The RBA expects inflation to return to the target range of 2–3 per cent in 2025, and to the midpoint in 2026, as services price inflation declines gradually and goods price inflation remains low.

The RBA also stated that higher interest rates are working to establish a more sustainable balance between aggregate demand and supply in the economy, and that the labour market conditions are easing gradually but remain tighter than is consistent with sustained full employment and inflation at target. The RBA acknowledged that household consumption growth is weak, as is dwelling investment, due to the high inflation weighing on people’s real incomes.

The RBA emphasised that the economic outlook is uncertain and that it remains highly attentive to inflation risks. The RBA highlighted the uncertainties regarding the global developments, such as the situation in China, Ukraine and the Middle East, as well as the domestic factors, such as the lags in the effect of monetary policy, the response of firms’ pricing decisions and wages to the slower growth in the economy, and the outlook for household consumption. The RBA reiterated that returning inflation to target is the priority.

This summary is based on the media release by the RBA.