The Reserve Bank of Australia (RBA) decided to keep interest rates steady at 4.35% during its recent meeting, aligning with expectations from economists surveyed by Reuters. The RBA emphasized that inflation is 'still too high,' prompting the decision to pause rate increases while it assesses the effects of previous hikes and ongoing global oil supply disruptions.
Following the announcement, the Australian S&P ASX/200 index experienced a slight decline, and the Australian dollar weakened by 0.3% against the U.S. dollar, trading at 0.705. The RBA noted that despite a recent GDP growth of 2.5% year-on-year, which fell short of expectations, inflation continues to exceed its target of 2%-3%.
The April inflation rate softened to 4.2% year-on-year, but higher fuel prices are contributing to sustained inflationary pressures across various goods and services. The RBA warned that prolonged uncertainty could further dampen growth in Australia and its major trading partners, indicating that the economic outlook remains cautious as the central bank prepares to respond to evolving conditions