The Reserve Bank of Australia has decided to lift the cash rate again — upping it by 25 basis points to 4.35% for November, as widely anticipated. The reason for this decision is that inflation remains too high, causing stress on household budgets and businesses, and sits well outside the central bank's target band of 2% to 3%.
The statement: “Inflation in Australia has passed its peak but is still too high and is proving more persistent than expected a few months ago. The latest reading on CPI inflation indicates that while goods price inflation has eased further, the prices of many services are continuing to rise briskly.
“While the central forecast is for CPI inflation to continue to decline, progress looks to be slower than earlier expected. CPI inflation is now expected to be around 3.5% by the end of 2024 and at the top of the target range of 2 to 3% by the end of 2025.
“The board judged an increase in interest rates was warranted today to be more assured that inflation would return to target in a reasonable timeframe.”
“Given that the economy is forecast to grow below trend, employment is expected to grow slower than the labour force and the unemployment rate is expected to rise gradually to around 4.25%. This is a more moderate increase than previously forecast. Wages growth has picked up over the past year but is still consistent with the inflation target, provided that productivity growth picks up.”
What has changed: This is the first interest rate rise since July and follows alarmingly high price growth for the three months through September and strong retail sales numbers.
What next: The RBA will hold its next policy meeting in December, the last opportunity to act on rates before an extended break over the summer. The central bank will update its full quarterly economic projections on Friday.