RBA Holds Interest Rates Steady at 3.6% in September
The Reserve Bank of Australia (RBA) has decided to maintain the cash rate at 3.6% at its September meeting, following a series of cuts earlier in the year. This pause comes after the RBA lowered rates three times previously in 2023, bringing them down from a high of 4.35% before the February board meeting.
The decision reflects a cautious approach as the Australian economy shows signs of recovery and inflation remains a concern. Recent monthly inflation data registered at 3%, exceeding economists’ expectations, especially in the services sector.
In a statement released after the meeting, the RBA Monetary Policy Board noted, “with signs that private demand is recovering, indications that inflation may be persistent in some areas and labor market conditions overall remaining stable, the board decided that it was appropriate to maintain the cash rate at its current level at this meeting.”
The RBA also observed positive momentum in key economic areas. “Private consumption is picking up as real household incomes rise and measures of financial conditions ease,” the board stated. Moreover, the housing market is strengthening, indicating the impact of previous rate reductions. Credit remains accessible to both households and businesses.
Recent data from the australian Bureau of Statistics shows annual private sector credit growth reached 7.2% in August – the fastest pace as the global financial crisis, excluding the period of exceptionally low rates during the pandemic.
JP Morgan economists Tom Ryan and Ben Jarman predict this “robust credit growth should also support an ongoing recovery in housing, business investment and private consumption.”
The RBA acknowledged that while financial conditions have eased as the beginning of the year, “it will take some time to see the full effects of earlier cash rate reductions.” RBA chief economist Sarah Hunter recently told a parliamentary committee that Australia’s economy appeared to be in a “cyclical upswing.”
