SYDNEY (Reuters) – Australia’s central bank (RBA) is set to adopt a policy of lowering interest rates, like other central banks around the world, after leaving rates unchanged for more than of a year although new data will determine whether it will act as early as February.
The RBA certainly kept the deposit rate unchanged at 4.35% at the end of its December meeting, but the institution softened its “hawkish” tone, notably removing from its press release a line according to which monetary policy should remain restrictive.
“Recent data on inflation and economic conditions are still consistent with the (November) forecast, and the Council is increasingly convinced that inflation is sustainably approaching its target,” the Council said. RBA in the press release.
The Australian dollar fell 0.9% to 0.6380 and three-year bond futures rose 9 basis points to 96.289, the highest since October. Swaps now indicate there is a 57% chance of a rate cut in February, with the first easing already priced in by April next year.
Asked about the prospects of a cut in February, RBA Governor Michele Bullock said she didn’t “really know”, adding that it would be necessary to wait for quarterly inflation data, as well as indicators of the labor market and consumption, before making a decision.
“We think things are moving so far in line with our forecasts and if they continue to do so, at some point we will be confident that inflation is coming back into range and we will be able to contemplate that,” said Michele Bullock.
Headline inflation slowed to 2.8% in the third quarter, returning to the target range, but thanks to temporary government rebates on electricity bills, while core inflation remained stable at 3.5 %.
The RBA has kept its policy unchanged for over a year now, while other central banks, notably the US Federal Reserve and the European Central Bank, have started to cut interest rates. The institution said the current restrictive rate of 4.35% – up from 0.1% during the pandemic – was necessary to bring inflation back to its target range of 2-3%.
(Reporting by Stella Qiu, Bertrand De Meyer, editing by Kate Entringer)
Copyright © 2024 Thomson Reuters
I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.
