RBA keeps interest rates steady and reiterates commitment to reduce inflation via Investing.com

Investing.com– The Reserve Bank of Australia kept interest rates steady on Tuesday and said it remained committed to reducing inflation, which it sees as still too high.

The RBA held a rate of 4.35% for the seventh consecutive meeting, as expected.

The central bank said that while headline consumer price index inflation eased, core inflation remained “too high” by the bank’s standards.

Long-term inflation expectations remained within the bank’s forecast and the RBA said it was important that this remained so. But the RBA said that while inflation was expected to ease in the near term on government support, it did not see prices returning “sustainably” to its target range until 2026.

The central bank did not provide any explicit comment on raising interest rates in the coming months, saying it remained alert to any further upside risks to inflation and was not ruling out “anything in or out”.

“The (rate-setting) board remains resolute in its determination to return inflation to target and will do whatever is necessary to achieve that result,” the RBA said in a statement.

Recent data showed CPI inflation remained high, while Australia’s marked growth for five consecutive months.

While labor market strength is showing some signs of resilience in the Australian economy, it also heralds sticky inflation in the near term.

Governor Michele Bullock has repeatedly warned in recent months that sticky inflation could still prompt more rate hikes from the central bank.

Analysts at ANZ expect the bank to hold rates steady until at least the first quarter of 2025 and that any plans to start cutting rates could be delayed by persistent inflation and the strength of the labor market.

Data on Wednesday is expected to show that inflation has fallen within the RBA’s 2% to 3% target range. But core inflation is expected to have remained high.

The Aussie dollar pair extended gains slightly after the RBA statement, while the stock index remained in negative territory.

The RBA is an outlier among its global peers in that it still maintains a relatively dovish outlook on rates even as the Federal Reserve and other major central banks have begun to cut interest rates.