People walk past the Reserve Bank of Australia building in Sydney’s CBD on July 4, 2017.
Saeed Khan | AFP | Getty Images
The Reserve Bank of Australia kept interest rates steady at its final meeting of the year but softened its hawkish tone, noting that the board had “some confidence” that inflation would return to target.
this Australian dollar Down 0.8% at $0.6380 1-year bond futures It rose 5 basis points to 96.26, the highest since October. The swap now means there is a split on the likelihood of a rate cut in February, with the full impact of the first easing not being felt until April next year.
The Reserve Bank of Australia concluded its December policy meeting by keeping the cash rate unchanged at 4.35%, consistent with the rate throughout the year. The statement omitted an earlier sentence that the RBA board “would not rule out any decision” and that restrictive policy would need to remain in place.
Markets have high hopes for a stable outcome as RBA Governor Michele Bullock has repeatedly said underlying inflation remains too high for rate cuts in the near term, including two weeks ago.
“Recent data on inflation and economic conditions remain consistent with these forecasts, and the Committee is confident that inflation is continuing to move toward its target,” the committee said in a statement.
For more than a year, the Reserve Bank of Australia has maintained policy stability, believing that the current cash rate of 4.35% (0.1% during the epidemic) is restrictive enough to allow inflation to reach the target range of 2-3% while maintaining employment growth.
Some investors had bet that the Reserve Bank of Australia might take a dovish stance after data showed unexpectedly weak economic growth in the third quarter, meaning it would have to cut its economic forecasts a month after they were released.
An expected rebound in consumer spending has yet to materialize, bank research shows, with consumers mostly holding on to windfalls from government tax cuts and debt repayments.
Anecdotal evidence points to strong sales during Black Friday, but a National Australia Bank survey released earlier in the day showed business conditions fell to their lowest level since late 2020 in November, suggesting the economy is not recovering as expected this quarter.
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