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RBA Interest Rate - In today's meeting, the Board decided to maintain the cash rate target at 4.10% and the interest rate on Exchange Settlement balances at 4.00%, with no changes.
Since May of last year, the interest rate has increased by 4%. The purpose of this rate hike is to create a more stable balance between supply and demand in the economy, and this policy will continue.
Considering this and the uncertainties about the economic outlook, the Board has decided to keep the interest rate stable this month. This decision provides further opportunity to assess the impact of the rate increases so far and the future economic outlook.
Inflation in Australia has peaked but remains high and is expected to stay elevated for some time. Relevant inflation indicators suggest that goods prices are gradually decreasing, while service prices continue to rise rapidly, and fuel prices have recently seen a significant increase.
Rental inflation also remains high. The central estimate for CPI inflation is that it will continue to decline and is expected to return to the 2–3% target range by the end of 2025.
Australia's economic growth was slightly stronger than expected in the first half of this year. However, the economy is still in a phase of below-trend growth, and this is expected to continue for some time.
High inflation negatively impacts real incomes and restricts the growth of household consumption and housing investment. Nonetheless, the labor market remains tight, though it has eased slightly.
Given the forecast for below-trend economic growth and a slight shift in the labor market, the unemployment rate is expected to gradually increase to around 4½% by the end of next year.
Wage growth has accelerated over the past year, but it remains in line with the inflation target, as long as productivity growth also increases.
Keeping inflation within the target range is the Board's top priority. High inflation negatively impacts everyone’s lives and disrupts economic stability.
It reduces the value of savings, adds pressure to household budgets, complicates business planning and investment, and worsens income inequality. If high inflation persists in expectations, lowering it will be more costly, involving higher interest rates and greater increases in unemployment. So far, medium-term inflation expectations remain aligned with the target, which is crucial to maintain.
Recent data is consistent with the inflation outlook returning to the 2–3% target range within the predicted period while noting continued growth and job opportunities.
Inflation has started to decline, the labor market remains strong, and the economy is still operating at a high level of capacity utilization, despite slowed growth.
Warning!
This analysis is based on fundamental and technical perspectives from trusted sources, not as advice or an invitation. Always remember that this content aims to enrich readers' information. Always conduct independent research on other forex information as a reference for your trading.
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