RBA pauses cash rate hikes to assess economic impacts
Sydney (16 June)
The Reserve Bank of Australia’s (RBA) Monetary Policy Board has maintained its cash rate target at 4.35% to assess the economic impact of recent rate hikes and oil supply disruptions, RBA Governor Michele Bullock said on 16 June.
The Monetary Policy Board made a unanimous decision and did not consider a rate hike at its June meeting.
But consumer inflation is too high and the Board is prepared to increase its cash rate target at future meetings, if needed, Governor Bullock said. “I can’t rule out that if inflation [does not decline], then we might have to do more,” she added.
Australia’s annual consumer inflation rate reached 4.2% in April, down from 4.6% in March, data from the Australian Bureau of Statistics (ABS) show. The RBA expects annual consumer inflation to peak at 4.8% in June 2026, under its baseline economic forecast, it said on 5 May.
The bank’s three previous rate hikes have placed downward pressure on inflation, but some businesses may be lifting prices to cover high fuel costs linked to the US-Israeli war in Iran, the Monetary Policy Committee said on 16 June.
The US-Iran Peace Deal, which is set to take effect on 19 June, could reduce inflationary pressures. “If the conflict does end and the Strait of Hormuz is reopened, this should support the flow of commodities and lower prices. But this could take some time, and an orderly resolution is still not assured,” Governor Bullock said.
Brent crude futures prices have declined to their lowest level since 2 March because of the US-Iran Peace Deal. Brent crude futures traded at $81.21/barrel on 15 June, up from $72.87/barrel before the war began.
The Australian Government has welcomed the RBA’s cash rate decision. “The [decision] is reassuring in the face of … global economic volatility,” Treasurer Jim Chalmers told reporters. “It doesn’t make life any easier for people, but it doesn’t make it harder either,” Chalmers added.
By Avinash Govind