Headlines via Reuters:
- Some further tightening of monetary policy may be required
- Board remains resolute in its determination to return inflation to the target
- Recent data are consistent with inflation returning to the target range over the forecast horizon
- Higher interest rates are working to establish a more sustainable balance between supply and demand in the economy
- Inflation in Australia has passed its peak but is still too high and will remain so for some time yet.
- Timely indicators on inflation suggest that goods price inflation has eased further, but the prices of many services are continuing to rise briskly
- Central forecast is for CPI inflation to continue to decline and to be back within the 2–3 per cent target range in late 2025
- There are significant uncertainties around the outlook
- Returning inflation to target within a reasonable timeframe remains the Board’s priority
- Inflation is coming down, the labour market remains strong and the economy is operating at a high level of capacity utilisation
Also as expected is the hawkish tilt leaving the option open for further rate hikes that 'may be required'. The comments on inflation seem to me that the Bank is quite happy with the progress being made. There is that nod to high services inflation, which is a concern that may prompt a November rate hile. We await the October 25 publication of the quarterly CPI data for clues on this.
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First meeting for the new Governor.
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The Reserve Bank of Australia (RBA) cash rate is the overnight money market interest rate in Australia
- Its the rate at which banks and financial institutions lend to and borrow from each other for overnight loans
- The cash rate is used by the RBA as its primary tool for implementing monetary policy. By adjusting the cash rate, the RBA aims to influence the level of economic activity in Australia, to control inflation, and achieve other economic objectives.
- Changes in the cash rate directly influence borrowing costs in the economy. A lower cash rate often means lower interest rates on various loans and credit products, making borrowing cheaper for households and businesses. Conversely, a higher cash rate can make borrowing more expensive.
- For FX traders, the cash rate can influence the value of the Australian dollar (AUD) on foreign exchange markets. For instance, a higher cash rate might attract foreign capital seeking better returns, potentially pushing up the value of the AUD. Conversely, a lower cash rate might deter investment and put downward pressure on the AUD.
- Changes in the cash rate can have broad effects on consumer spending, business investment, and overall economic growth. For example, a rate cut might stimulate borrowing and spending, potentially boosting the economy, while a rate hike could dampen borrowing and spending.