Economists and industry experts are in consensus that the Reserve Bank of Australia (RBA) will keep its policy interest rate unchanged in the upcoming meeting. This expectation follows comments from RBA Governor Michele Bullock, who stated at the Anika Foundation earlier this month that the board does not foresee any rate cuts in the near future.
Bullock highlighted persistent inflation pressures in sectors such as home construction, insurance, and rentals, despite Australian Treasurer Jim Chalmers expressing concerns that rising interest rates have “smashed” the economy.
The Australian economy showed resilience in August, adding more jobs than anticipated, with the unemployment rate holding steady at 4.2%, as reported by the Australian Bureau of Statistics (ABS) on September 19. This robust employment data reinforces the RBA’s view that a rate cut is unlikely in the short term, as it suggests a resilient labor market even amid signs of economic slowdown.
RBA Assistant Governor (Economic) Sarah Hunter noted earlier this month that the labor market remains tight relative to full employment. She pointed out that current conditions are perceived to be “above” full employment, indicating that the unemployment rate would need to rise for inflation to continue its downward trajectory.
Moreover, the RBA is expected to refrain from any policy changes until after the critical Consumer Price Index (CPI) data for the third quarter is released on October 30, which could provide further insights into the central bank’s progress on inflation.
Analysts at TD Securities (TDS) previewing the RBA’s policy decision stated, “The RBA communication and the run of data since the Bank’s August meeting provide no compelling reason for a shift in stance at this week’s meeting, ruling out a rate cut this year.”
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