Reserve Bank of Australia (RBA) Governor Michele Bullock has said the RBA board was unlikely to reduce the cash rate for at least six months.
Speaking at a press conference, Governor Bullock said the market appeared to think rates would start falling in 2024, but that this was not realistic. “I think the board’s feeling is that the near term, by the end of the year and the next six months, given what the board knows at the moment and given what the forecasts are, that that doesn’t align with their thinking about interest rate reductions at the moment,” she said.
The board is trying to reduce inflation, which is currently at 3.8%, to its target range of 2-3%, and is unlikely to start reducing the cash rate until inflation has either fallen within the target range or shown signs that it is on track to do so.
However, in the Statement on Monetary Policy, which was released in early August, the RBA said inflation was “proving persistent”.
“Inflation is expected to take slightly longer to reach the target than was thought at the time of the May forecasts. Underlying inflation is forecast to return to the target range of 2-3% in late 2025 and approach the midpoint in 2026. This is a slightly slower return to target than forecast in May and is due to greater inflationary pressures in the economy,” the RBA said.
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