RBA keeps cash rate target at 4.10% today, leaving room for further evaluation of the economic landscape. However, the central bank’s statement hinted at the possible need for further tightening of monetary policy in the future.
The statement noted, “Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe,” with the stipulation that this would be dependent on how the economy and inflation evolve.
The bank justifies its decision to keep rates unchanged, stating it “provides the Board with more time to assess the state of the economy and the economic outlook and associated risks.”
The statement highlighted concerns over the risk of persistent high inflation leading to broader increases in both prices and wages. This concern is heightened due to the limited spare capacity in the economy coupled with a very low unemployment rate.
In response to these potential inflationary pressures, RBA pledged vigilance, stating it “will continue to pay close attention to both the evolution of labour costs and the price-setting behaviour of firms.”