RBA Keeps Rates on Hold, Defying Global Trend
By James Glynn
SYDNEY--Australia's central bank kept interest rates steady on Tuesday, deepening a split with global counterparts including the Federal Reserve that are loosening policy as they grow increasingly confident that inflation is under control.
The Reserve Bank of Australia's decision to hold the official cash rate at 4.35%, which was widely expected by economists, reveals the stark choice facing policymakers who continue to worry about price pressures that are lessening elsewhere in the world.
Australia's jobs market remains very tight, giving workers a stronger hand in wage negotiations. The country is also experiencing a wave of migration that is stoking competition for housing and services such as childcare, driving up costs.
But moves by other central banks to cut interest rates risk pushing up the Australian dollar that makes Australia's exports less competitive at a time when consumers are feeling the strain from an extended period of elevated borrowing costs. Australia's economic growth has been lackluster in recent quarters, amplified by a slowdown in China, which is its largest trading partner.
Australia is now an outlier among G-10 central banks after the Fed delivered an outsized cut to its key funds rate of 50 basis points last week.
The RBA's decision to leave the OCR unchanged was laced with anxiety about inflation risks.
Recent data "have reinforced the need to remain vigilant to upside risks to inflation and the board is not ruling anything in or out," the central bank said.
"Policy will need to be sufficiently restrictive until the board is confident that inflation is moving sustainably towards the target range," it added.
Economists are now debating how long the RBA can maintain its current position given the deflationary forces now gathering steam overseas. In recent remarks, RBA Gov. Michele Bullock has signaled that a rate cut is unlikely to happen this year.
Write to James Glynn at james.glynn@wsj.com
(END) Dow Jones Newswires
September 24, 2024 01:09 ET (05:09 GMT)
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